Correlation Between MSCI ACWI and ThedirectoryCom

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

Diversification Opportunities for MSCI ACWI and ThedirectoryCom

-0.65

Correlation Coefficient

MSCI ACWI  ThedirectoryCom

Excellent diversification

The 3 months correlation between MSCI and ThedirectoryCom is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding MSCI ACWI exAUCONSUMER and ThedirectoryCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ThedirectoryCom 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 ThedirectoryCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ThedirectoryCom has no effect on the direction of MSCI ACWI i.e., MSCI ACWI and ThedirectoryCom go up and down completely randomly.

Pair Corralation between MSCI ACWI and ThedirectoryCom

Assuming the 90 days horizon MSCI ACWI exAUCONSUMER is expected to generate 0.02 times more return on investment than ThedirectoryCom. However, MSCI ACWI exAUCONSUMER is 53.63 times less risky than ThedirectoryCom. It trades about 0.04 of its potential returns per unit of risk. ThedirectoryCom is currently generating about -0.13 per unit of risk. If you would invest  2,468  in MSCI ACWI exAUCONSUMER on September 29, 2024 and sell it today you would earn a total of  13.00  from holding MSCI ACWI exAUCONSUMER or generate 0.53% 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.  ThedirectoryCom

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.

ThedirectoryCom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ThedirectoryCom has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with MSCI ACWI and ThedirectoryCom

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

The idea behind MSCI ACWI exAUCONSUMER and ThedirectoryCom 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.