Correlation Between MSCI ACWI and Highlands Bankshares

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

Diversification Opportunities for MSCI ACWI and Highlands Bankshares

0.78

Correlation Coefficient

MSCI ACWI  Highlands Bankshares

Poor diversification

The 3 months correlation between MSCI and Highlands is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding MSCI ACWI exAUCONSUMER and Highlands Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highlands Bankshares 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 Highlands Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highlands Bankshares has no effect on the direction of MSCI ACWI i.e., MSCI ACWI and Highlands Bankshares go up and down completely randomly.

Pair Corralation between MSCI ACWI and Highlands Bankshares

Assuming the 90 days horizon MSCI ACWI exAUCONSUMER is expected to under-perform the Highlands Bankshares. But the stock apears to be less risky and, when comparing its historical volatility, MSCI ACWI exAUCONSUMER is 2.92 times less risky than Highlands Bankshares. The stock trades about -0.13 of its potential returns per unit of risk. The Highlands Bankshares is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,273  in Highlands Bankshares on September 28, 2024 and sell it today you would earn a total of  9.00  from holding Highlands Bankshares or generate 0.27% return on investment over 90 days.

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

MSCI ACWI exAUCONSUMER  vs.  Highlands Bankshares

MSCI ACWI exAUCONSUMER

Risk-Adjusted Performance

2 of 100

Weak

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

Highlands Bankshares

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Highlands Bankshares are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Highlands Bankshares may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with MSCI ACWI and Highlands Bankshares

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

The idea behind MSCI ACWI exAUCONSUMER and Highlands Bankshares 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.