Correlation Between HSBC MSCI and LG Russell

Can any of the company-specific risk be diversified away by investing in both HSBC MSCI and LG Russell 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 LG Russell 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 LG Russell 2000, you can compare the effects of market volatilities on HSBC MSCI and LG Russell 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 LG Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC MSCI and LG Russell.

Diversification Opportunities for HSBC MSCI and LG Russell

0.6

Correlation Coefficient

HSBC MSCI  LG Russell

Poor diversification

The 3 months correlation between HSBC and RTWO is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding HSBC MSCI Japan and LG Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Russell 2000 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 LG Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Russell 2000 has no effect on the direction of HSBC MSCI i.e., HSBC MSCI and LG Russell go up and down completely randomly.

Pair Corralation between HSBC MSCI and LG Russell

Assuming the 90 days trading horizon HSBC MSCI is expected to generate 3.36 times less return on investment than LG Russell. But when comparing it to its historical volatility, HSBC MSCI Japan is 1.62 times less risky than LG Russell. It trades about 0.04 of its potential returns per unit of risk. LG Russell 2000 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9,706  in LG Russell 2000 on October 11, 2024 and sell it today you would earn a total of  586.00  from holding LG Russell 2000 or generate 6.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

HSBC MSCI Japan  vs.  LG Russell 2000

HSBC MSCI Japan

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC MSCI Japan are ranked lower than 2 (%) 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.

LG Russell 2000

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LG Russell 2000 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, LG Russell may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with HSBC MSCI and LG Russell

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

The idea behind HSBC MSCI Japan and LG Russell 2000 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.