Correlation Between MSCI ACWI and Embecta Corp

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

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

Diversification Opportunities for MSCI ACWI and Embecta Corp

-0.96

Correlation Coefficient

MSCI ACWI  Embecta Corp

Pay attention - limited upside

The 3 months correlation between MSCI and Embecta is -0.96. Overlapping area represents the amount of risk that can be diversified away by holding MSCI ACWI exAUCONSUMER and Embecta Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embecta Corp and MSCI ACWI 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 MSCI ACWI exAUCONSUMER are associated (or correlated) with Embecta Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embecta Corp has no effect on the direction of MSCI ACWI i.e., MSCI ACWI and Embecta Corp go up and down completely randomly.

Pair Corralation between MSCI ACWI and Embecta Corp

Assuming the 90 days horizon MSCI ACWI exAUCONSUMER is expected to generate 0.07 times more return on investment than Embecta Corp. However, MSCI ACWI exAUCONSUMER is 13.62 times less risky than Embecta Corp. It trades about 0.18 of its potential returns per unit of risk. Embecta Corp is currently generating about -0.2 per unit of risk. If you would invest  2,441  in MSCI ACWI exAUCONSUMER on December 20, 2024 and sell it today you would earn a total of  57.00  from holding MSCI ACWI exAUCONSUMER or generate 2.34% return on investment over 90 days.

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

MSCI ACWI exAUCONSUMER  vs.  Embecta Corp

MSCI ACWI exAUCONSUMER

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MSCI ACWI exAUCONSUMER are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, MSCI ACWI is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Embecta Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Embecta Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with MSCI ACWI and Embecta Corp

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

The idea behind MSCI ACWI exAUCONSUMER and Embecta Corp 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.