Correlation Between MSCI and GUOTAI JUNAN

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

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

Diversification Opportunities for MSCI and GUOTAI JUNAN

0.78

Correlation Coefficient

MSCI  GUOTAI JUNAN

Poor diversification

The 3 months correlation between MSCI and GUOTAI is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding MSCI Inc and GUOTAI JUNAN SEC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GUOTAI JUNAN SEC and 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 MSCI Inc are associated (or correlated) with GUOTAI JUNAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GUOTAI JUNAN SEC has no effect on the direction of MSCI i.e., MSCI and GUOTAI JUNAN go up and down completely randomly.

Pair Corralation between MSCI and GUOTAI JUNAN

Assuming the 90 days horizon MSCI is expected to generate 3.1 times less return on investment than GUOTAI JUNAN. But when comparing it to its historical volatility, MSCI Inc is 4.31 times less risky than GUOTAI JUNAN. It trades about 0.17 of its potential returns per unit of risk. GUOTAI JUNAN SEC is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  95.00  in GUOTAI JUNAN SEC on September 15, 2024 and sell it today you would earn a total of  47.00  from holding GUOTAI JUNAN SEC or generate 49.47% return on investment over 90 days.

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

MSCI Inc  vs.  GUOTAI JUNAN SEC

MSCI Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MSCI Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MSCI reported solid returns over the last few months and may actually be approaching a breakup point.

GUOTAI JUNAN SEC

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GUOTAI JUNAN SEC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GUOTAI JUNAN reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MSCI and GUOTAI JUNAN

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

The idea behind MSCI Inc and GUOTAI JUNAN SEC 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.