Correlation Between MSCI ACWI and Dillards Capital

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

By analyzing existing cross correlation between MSCI ACWI exAUCONSUMER and Dillards Capital Trust, you can compare the effects of market volatilities on MSCI ACWI and Dillards Capital 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 ACWI with a short position of Dillards Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of MSCI ACWI and Dillards Capital.

Diversification Opportunities for MSCI ACWI and Dillards Capital

0.61

Correlation Coefficient

MSCI ACWI  Dillards Capital

Poor diversification

The 3 months correlation between MSCI and Dillards is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding MSCI ACWI exAUCONSUMER and Dillards Capital Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dillards Capital Trust and MSCI ACWI 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 ACWI exAUCONSUMER are associated (or correlated) with Dillards Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dillards Capital Trust has no effect on the direction of MSCI ACWI i.e., MSCI ACWI and Dillards Capital go up and down completely randomly.

Pair Corralation between MSCI ACWI and Dillards Capital

Assuming the 90 days horizon MSCI ACWI exAUCONSUMER is expected to generate 0.8 times more return on investment than Dillards Capital. However, MSCI ACWI exAUCONSUMER is 1.25 times less risky than Dillards Capital. It trades about 0.05 of its potential returns per unit of risk. Dillards Capital Trust is currently generating about 0.0 per unit of risk. If you would invest  2,474  in MSCI ACWI exAUCONSUMER on September 23, 2024 and sell it today you would earn a total of  13.00  from holding MSCI ACWI exAUCONSUMER or generate 0.53% return on investment over 90 days.

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

MSCI ACWI exAUCONSUMER  vs.  Dillards Capital Trust

MSCI ACWI exAUCONSUMER

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MSCI ACWI exAUCONSUMER are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, MSCI ACWI is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Dillards Capital Trust

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with MSCI ACWI and Dillards Capital

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

The idea behind MSCI ACWI exAUCONSUMER and Dillards Capital Trust 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.