Correlation Between China Datang and MSCI

Can any of the company-specific risk be diversified away by investing in both China Datang and MSCI at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining China Datang and MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Datang and MSCI Inc, you can compare the effects of market volatilities on China Datang and MSCI and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in China Datang with a short position of MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Datang and MSCI.

Diversification Opportunities for China Datang and MSCI

0.4

Correlation Coefficient

China Datang  MSCI

Very weak diversification

The 3 months correlation between China and MSCI is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding China Datang and MSCI Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSCI Inc and China Datang is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on China Datang are associated (or correlated) with MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSCI Inc has no effect on the direction of China Datang i.e., China Datang and MSCI go up and down completely randomly.

Pair Corralation between China Datang and MSCI

Assuming the 90 days horizon China Datang is expected to generate 1.24 times less return on investment than MSCI. In addition to that, China Datang is 1.84 times more volatile than MSCI Inc. It trades about 0.04 of its total potential returns per unit of risk. MSCI Inc is currently generating about 0.09 per unit of volatility. If you would invest  55,486  in MSCI Inc on October 23, 2024 and sell it today you would earn a total of  4,354  from holding MSCI Inc or generate 7.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

China Datang  vs.  MSCI Inc

China Datang

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Datang are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, China Datang may actually be approaching a critical reversion point that can send shares even higher in February 2025.

MSCI Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MSCI Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MSCI may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with China Datang and MSCI

The main advantage of trading using opposite China Datang and MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Datang position performs unexpectedly, MSCI can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in MSCI will offset losses from the drop in MSCI's long position.

The idea behind China Datang and MSCI Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Insider Screener module to find insiders across different sectors to evaluate their impact on performance.