Correlation Between MSCI ACWI and Indra Sistemas

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

Diversification Opportunities for MSCI ACWI and Indra Sistemas

-0.61

Correlation Coefficient

MSCI ACWI  Indra Sistemas

Excellent diversification

The 3 months correlation between MSCI and Indra is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding MSCI ACWI exAUCONSUMER and Indra Sistemas SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indra Sistemas SA 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 Indra Sistemas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indra Sistemas SA has no effect on the direction of MSCI ACWI i.e., MSCI ACWI and Indra Sistemas go up and down completely randomly.

Pair Corralation between MSCI ACWI and Indra Sistemas

Assuming the 90 days horizon MSCI ACWI exAUCONSUMER is expected to generate 0.17 times more return on investment than Indra Sistemas. However, MSCI ACWI exAUCONSUMER is 5.79 times less risky than Indra Sistemas. It trades about 0.09 of its potential returns per unit of risk. Indra Sistemas SA is currently generating about -0.09 per unit of risk. If you would invest  2,412  in MSCI ACWI exAUCONSUMER on September 27, 2024 and sell it today you would earn a total of  62.00  from holding MSCI ACWI exAUCONSUMER or generate 2.57% return on investment over 90 days.

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

MSCI ACWI exAUCONSUMER  vs.  Indra Sistemas SA

MSCI ACWI exAUCONSUMER

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MSCI ACWI exAUCONSUMER are ranked lower than 1 (%) 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.

Indra Sistemas SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indra Sistemas SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with MSCI ACWI and Indra Sistemas

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

The idea behind MSCI ACWI exAUCONSUMER and Indra Sistemas SA 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.