Correlation Between MSCI ACWI and Middlebury National

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

Diversification Opportunities for MSCI ACWI and Middlebury National

0.7

Correlation Coefficient

MSCI ACWI  Middlebury National

Poor diversification

The 3 months correlation between MSCI and Middlebury is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding MSCI ACWI exAUCONSUMER and Middlebury National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Middlebury National 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 Middlebury National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Middlebury National has no effect on the direction of MSCI ACWI i.e., MSCI ACWI and Middlebury National go up and down completely randomly.

Pair Corralation between MSCI ACWI and Middlebury National

Assuming the 90 days horizon MSCI ACWI is expected to generate 2.95 times less return on investment than Middlebury National. But when comparing it to its historical volatility, MSCI ACWI exAUCONSUMER is 6.97 times less risky than Middlebury National. It trades about 0.06 of its potential returns per unit of risk. Middlebury National is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,105  in Middlebury National on September 26, 2024 and sell it today you would earn a total of  395.00  from holding Middlebury National or generate 12.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	73.39%
Values	Daily Returns

MSCI ACWI exAUCONSUMER  vs.  Middlebury National

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.

Middlebury National

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Middlebury National are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Middlebury National unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MSCI ACWI and Middlebury National

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

The idea behind MSCI ACWI exAUCONSUMER and Middlebury National 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.