Correlation Between Franklin FTSE and HSBC MSCI

Can any of the company-specific risk be diversified away by investing in both Franklin FTSE and HSBC 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 Franklin FTSE and HSBC MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Franklin FTSE Brazil and HSBC MSCI USA, you can compare the effects of market volatilities on Franklin FTSE and HSBC 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 Franklin FTSE with a short position of HSBC MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin FTSE and HSBC MSCI.

Diversification Opportunities for Franklin FTSE and HSBC MSCI

-0.45

Correlation Coefficient

Franklin FTSE  HSBC MSCI

Very good diversification

The 3 months correlation between Franklin and HSBC is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Franklin FTSE Brazil and HSBC MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC MSCI USA and Franklin FTSE 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 Franklin FTSE Brazil are associated (or correlated) with HSBC MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC MSCI USA has no effect on the direction of Franklin FTSE i.e., Franklin FTSE and HSBC MSCI go up and down completely randomly.

Pair Corralation between Franklin FTSE and HSBC MSCI

Assuming the 90 days trading horizon Franklin FTSE Brazil is expected to under-perform the HSBC MSCI. But the etf apears to be less risky and, when comparing its historical volatility, Franklin FTSE Brazil is 3.86 times less risky than HSBC MSCI. The etf trades about -0.08 of its potential returns per unit of risk. The HSBC MSCI USA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,281  in HSBC MSCI USA on September 12, 2024 and sell it today you would earn a total of  277.00  from holding HSBC MSCI USA or generate 12.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Franklin FTSE Brazil  vs.  HSBC MSCI USA

Franklin FTSE Brazil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin FTSE Brazil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

HSBC MSCI USA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC MSCI USA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, HSBC MSCI unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Franklin FTSE and HSBC MSCI

The main advantage of trading using opposite Franklin FTSE and HSBC MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin FTSE position performs unexpectedly, HSBC 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 HSBC MSCI will offset losses from the drop in HSBC MSCI's long position.

The idea behind Franklin FTSE Brazil and HSBC MSCI USA 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.