Correlation Between MSCI and Moodys

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

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

Diversification Opportunities for MSCI and Moodys

0.73

Correlation Coefficient

MSCI  Moodys

Poor diversification

The 3 months correlation between MSCI and Moodys is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding MSCI Inc and Moodys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moodys 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 Moodys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moodys has no effect on the direction of MSCI i.e., MSCI and Moodys go up and down completely randomly.

Pair Corralation between MSCI and Moodys

Assuming the 90 days horizon MSCI is expected to generate 2.7 times less return on investment than Moodys. But when comparing it to its historical volatility, MSCI Inc is 1.17 times less risky than Moodys. It trades about 0.07 of its potential returns per unit of risk. Moodys is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  36,079  in Moodys on April 22, 2025 and sell it today you would earn a total of  6,921  from holding Moodys or generate 19.18% 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.  Moodys

MSCI Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MSCI Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, MSCI may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Moodys

Risk-Adjusted Performance

Good

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

Pair Trading with MSCI and Moodys

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

The idea behind MSCI Inc and Moodys 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.