Correlation Between MSCI ACWI and RAYTHEON

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

Diversification Opportunities for MSCI ACWI and RAYTHEON

0.22

Correlation Coefficient

MSCI ACWI  RAYTHEON

Modest diversification

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

Pair Corralation between MSCI ACWI and RAYTHEON

Assuming the 90 days horizon MSCI ACWI exAUCONSUMER is expected to generate 0.23 times more return on investment than RAYTHEON. However, MSCI ACWI exAUCONSUMER is 4.35 times less risky than RAYTHEON. It trades about 0.21 of its potential returns per unit of risk. RAYTHEON TECHNOLOGIES PORATION is currently generating about 0.04 per unit of risk. If you would invest  2,442  in MSCI ACWI exAUCONSUMER on December 28, 2024 and sell it today you would earn a total of  65.00  from holding MSCI ACWI exAUCONSUMER or generate 2.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	86.67%
Values	Daily Returns

MSCI ACWI exAUCONSUMER  vs.  RAYTHEON TECHNOLOGIES PORATION

MSCI ACWI exAUCONSUMER

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MSCI ACWI exAUCONSUMER are ranked lower than 16 (%) 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.

RAYTHEON TECHNOLOGIES

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RAYTHEON TECHNOLOGIES PORATION are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, RAYTHEON is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MSCI ACWI and RAYTHEON

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

The idea behind MSCI ACWI exAUCONSUMER and RAYTHEON TECHNOLOGIES PORATION 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.