Correlation Between TMX Group and MSCI

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

By analyzing existing cross correlation between TMX Group Limited and MSCI Inc, you can compare the effects of market volatilities on TMX Group and 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 TMX Group with a short position of MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of TMX Group and MSCI.

Diversification Opportunities for TMX Group and MSCI

-0.71

Correlation Coefficient

TMX Group  MSCI

Pay attention - limited upside

The 3 months correlation between TMX and MSCI is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding TMX Group Limited and MSCI Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSCI Inc and TMX Group 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 TMX Group Limited are associated (or correlated) with MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSCI Inc has no effect on the direction of TMX Group i.e., TMX Group and MSCI go up and down completely randomly.

Pair Corralation between TMX Group and MSCI

Assuming the 90 days horizon TMX Group Limited is expected to generate 1.3 times more return on investment than MSCI. However, TMX Group is 1.3 times more volatile than MSCI Inc. It trades about 0.14 of its potential returns per unit of risk. MSCI Inc is currently generating about -0.05 per unit of risk. If you would invest  3,036  in TMX Group Limited on December 18, 2024 and sell it today you would earn a total of  498.00  from holding TMX Group Limited or generate 16.4% return on investment over 90 days.

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

TMX Group Limited  vs.  MSCI Inc

TMX Group Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TMX Group Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, TMX Group reported solid returns over the last few months and may actually be approaching a breakup point.

MSCI Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days MSCI Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, MSCI is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with TMX Group and MSCI

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

The idea behind TMX Group Limited and MSCI Inc 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.