Correlation Between VanEck IBoxx and HSBC MSCI

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

By analyzing existing cross correlation between VanEck iBoxx EUR and HSBC MSCI Japan, you can compare the effects of market volatilities on VanEck IBoxx and HSBC MSCI 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 VanEck IBoxx with a short position of HSBC MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck IBoxx and HSBC MSCI.

Diversification Opportunities for VanEck IBoxx and HSBC MSCI

0.76

Correlation Coefficient

VanEck IBoxx  HSBC MSCI

Poor diversification

The 3 months correlation between VanEck and HSBC is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding VanEck iBoxx EUR and HSBC MSCI Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC MSCI Japan and VanEck IBoxx 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 VanEck iBoxx EUR are associated (or correlated) with HSBC MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC MSCI Japan has no effect on the direction of VanEck IBoxx i.e., VanEck IBoxx and HSBC MSCI go up and down completely randomly.

Pair Corralation between VanEck IBoxx and HSBC MSCI

Assuming the 90 days trading horizon VanEck iBoxx EUR is expected to under-perform the HSBC MSCI. But the etf apears to be less risky and, when comparing its historical volatility, VanEck iBoxx EUR is 4.28 times less risky than HSBC MSCI. The etf trades about -0.53 of its potential returns per unit of risk. The HSBC MSCI Japan is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  3,873  in HSBC MSCI Japan on October 10, 2024 and sell it today you would lose (30.00) from holding HSBC MSCI Japan or give up 0.77% of portfolio value over 90 days.

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

VanEck iBoxx EUR  vs.  HSBC MSCI Japan

VanEck iBoxx EUR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck iBoxx EUR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, VanEck IBoxx is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

HSBC MSCI Japan

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with VanEck IBoxx and HSBC MSCI

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

The idea behind VanEck iBoxx EUR and HSBC MSCI Japan 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.