Correlation Between HSBC MSCI and IShares MSCI

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

By analyzing existing cross correlation between HSBC MSCI Japan and iShares MSCI Europe, you can compare the effects of market volatilities on HSBC MSCI and IShares 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 IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC MSCI and IShares MSCI.

Diversification Opportunities for HSBC MSCI and IShares MSCI

0.56

Correlation Coefficient

HSBC MSCI  IShares MSCI

Very weak diversification

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

Pair Corralation between HSBC MSCI and IShares MSCI

Assuming the 90 days trading horizon HSBC MSCI is expected to generate 6.59 times less return on investment than IShares MSCI. In addition to that, HSBC MSCI is 1.22 times more volatile than iShares MSCI Europe. It trades about 0.02 of its total potential returns per unit of risk. iShares MSCI Europe is currently generating about 0.19 per unit of volatility. If you would invest  4,332  in iShares MSCI Europe on December 27, 2024 and sell it today you would earn a total of  414.00  from holding iShares MSCI Europe or generate 9.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

HSBC MSCI Japan  vs.  iShares MSCI Europe

HSBC MSCI Japan

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC MSCI Japan are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, HSBC MSCI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

iShares MSCI Europe

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Europe are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with HSBC MSCI and IShares MSCI

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

The idea behind HSBC MSCI Japan and iShares MSCI Europe 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.