Correlation Between HSBC MSCI and Lyxor MSCI

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

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

Diversification Opportunities for HSBC MSCI and Lyxor MSCI

-0.56

Correlation Coefficient

HSBC MSCI  Lyxor MSCI

Excellent diversification

The 3 months correlation between HSBC and Lyxor is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding HSBC MSCI Indonesia and Lyxor MSCI Brazil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor MSCI Brazil and HSBC MSCI 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 HSBC MSCI Indonesia are associated (or correlated) with Lyxor MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor MSCI Brazil has no effect on the direction of HSBC MSCI i.e., HSBC MSCI and Lyxor MSCI go up and down completely randomly.

Pair Corralation between HSBC MSCI and Lyxor MSCI

Assuming the 90 days trading horizon HSBC MSCI Indonesia is expected to under-perform the Lyxor MSCI. In addition to that, HSBC MSCI is 1.34 times more volatile than Lyxor MSCI Brazil. It trades about -0.08 of its total potential returns per unit of risk. Lyxor MSCI Brazil is currently generating about 0.19 per unit of volatility. If you would invest  1,714  in Lyxor MSCI Brazil on December 30, 2024 and sell it today you would earn a total of  300.00  from holding Lyxor MSCI Brazil or generate 17.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

HSBC MSCI Indonesia  vs.  Lyxor MSCI Brazil

HSBC MSCI Indonesia

Risk-Adjusted Performance

Very Weak

Over the last 90 days HSBC MSCI Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Lyxor MSCI Brazil

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor MSCI Brazil are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Lyxor MSCI unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HSBC MSCI and Lyxor MSCI

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

The idea behind HSBC MSCI Indonesia and Lyxor MSCI Brazil 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.