Correlation Between VanEck AEX and HSBC MSCI

Can any of the company-specific risk be diversified away by investing in both VanEck AEX 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 AEX 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 AEX UCITS and HSBC MSCI Japan, you can compare the effects of market volatilities on VanEck AEX 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 AEX with a short position of HSBC MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck AEX and HSBC MSCI.

Diversification Opportunities for VanEck AEX and HSBC MSCI

0.73

Correlation Coefficient

VanEck AEX  HSBC MSCI

Poor diversification

The 3 months correlation between VanEck and HSBC is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding VanEck AEX UCITS 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 AEX 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 AEX UCITS 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 AEX i.e., VanEck AEX and HSBC MSCI go up and down completely randomly.

Pair Corralation between VanEck AEX and HSBC MSCI

Assuming the 90 days trading horizon VanEck AEX UCITS is expected to generate 0.71 times more return on investment than HSBC MSCI. However, VanEck AEX UCITS is 1.42 times less risky than HSBC MSCI. It trades about 0.1 of its potential returns per unit of risk. HSBC MSCI Japan is currently generating about -0.01 per unit of risk. If you would invest  8,717  in VanEck AEX UCITS on December 29, 2024 and sell it today you would earn a total of  371.00  from holding VanEck AEX UCITS or generate 4.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

VanEck AEX UCITS  vs.  HSBC MSCI Japan

VanEck AEX UCITS

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck AEX UCITS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, VanEck AEX is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

HSBC MSCI Japan

Risk-Adjusted Performance

Very Weak

Over the last 90 days HSBC MSCI Japan has generated negative risk-adjusted returns adding no value to investors with long positions. 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 AEX and HSBC MSCI

The main advantage of trading using opposite VanEck AEX and HSBC MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck AEX 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 AEX UCITS 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..