Correlation Between MSCI ACWI and Credit Enhanced

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

Diversification Opportunities for MSCI ACWI and Credit Enhanced

-0.22

Correlation Coefficient

MSCI ACWI  Credit Enhanced

Very good diversification

The 3 months correlation between MSCI and Credit is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding MSCI ACWI exAUCONSUMER and Credit Enhanced Corts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credit Enhanced Corts 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 Credit Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credit Enhanced Corts has no effect on the direction of MSCI ACWI i.e., MSCI ACWI and Credit Enhanced go up and down completely randomly.

Pair Corralation between MSCI ACWI and Credit Enhanced

Assuming the 90 days horizon MSCI ACWI is expected to generate 1.15 times less return on investment than Credit Enhanced. But when comparing it to its historical volatility, MSCI ACWI exAUCONSUMER is 3.53 times less risky than Credit Enhanced. It trades about 0.11 of its potential returns per unit of risk. Credit Enhanced Corts is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,616  in Credit Enhanced Corts on October 25, 2024 and sell it today you would earn a total of  42.00  from holding Credit Enhanced Corts or generate 1.61% return on investment over 90 days.

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

MSCI ACWI exAUCONSUMER  vs.  Credit Enhanced Corts

MSCI ACWI exAUCONSUMER

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MSCI ACWI exAUCONSUMER are ranked lower than 8 (%) 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.

Credit Enhanced Corts

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Credit Enhanced Corts are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Credit Enhanced is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with MSCI ACWI and Credit Enhanced

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

The idea behind MSCI ACWI exAUCONSUMER and Credit Enhanced Corts 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.