Correlation Between SPDR MSCI and MULTI UNITS

Can any of the company-specific risk be diversified away by investing in both SPDR MSCI and MULTI UNITS 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 SPDR MSCI and MULTI UNITS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SPDR MSCI Europe and MULTI UNITS LUXEMBOURG , you can compare the effects of market volatilities on SPDR MSCI and MULTI UNITS 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 SPDR MSCI with a short position of MULTI UNITS. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR MSCI and MULTI UNITS.

Diversification Opportunities for SPDR MSCI and MULTI UNITS

-0.37

Correlation Coefficient

SPDR MSCI  MULTI UNITS

Very good diversification

The 3 months correlation between SPDR and MULTI is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI Europe and MULTI UNITS LUXEMBOURG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MULTI UNITS LUXEMBOURG and SPDR MSCI 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 SPDR MSCI Europe are associated (or correlated) with MULTI UNITS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MULTI UNITS LUXEMBOURG has no effect on the direction of SPDR MSCI i.e., SPDR MSCI and MULTI UNITS go up and down completely randomly.

Pair Corralation between SPDR MSCI and MULTI UNITS

Assuming the 90 days trading horizon SPDR MSCI Europe is expected to under-perform the MULTI UNITS. In addition to that, SPDR MSCI is 1.66 times more volatile than MULTI UNITS LUXEMBOURG . It trades about -0.03 of its total potential returns per unit of risk. MULTI UNITS LUXEMBOURG is currently generating about 0.18 per unit of volatility. If you would invest  17,174  in MULTI UNITS LUXEMBOURG on September 13, 2024 and sell it today you would earn a total of  1,530  from holding MULTI UNITS LUXEMBOURG or generate 8.91% return on investment over 90 days.

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

SPDR MSCI Europe  vs.  MULTI UNITS LUXEMBOURG

SPDR MSCI Europe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR MSCI Europe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, SPDR MSCI is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

MULTI UNITS LUXEMBOURG

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MULTI UNITS LUXEMBOURG are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, MULTI UNITS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SPDR MSCI and MULTI UNITS

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

The idea behind SPDR MSCI Europe and MULTI UNITS LUXEMBOURG 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.