Correlation Between Moodys and MSCI

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

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

Diversification Opportunities for Moodys and MSCI

0.45

Correlation Coefficient

Moodys  MSCI

Very weak diversification

The 3 months correlation between Moodys and MSCI is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Moodys and MSCI Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSCI Inc and Moodys 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 Moodys 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 Moodys i.e., Moodys and MSCI go up and down completely randomly.

Pair Corralation between Moodys and MSCI

Considering the 90-day investment horizon Moodys is expected to generate 0.31 times more return on investment than MSCI. However, Moodys is 3.22 times less risky than MSCI. It trades about -0.2 of its potential returns per unit of risk. MSCI Inc is currently generating about -0.18 per unit of risk. If you would invest  39,389  in Moodys on January 30, 2024 and sell it today you would lose (1,776) from holding Moodys or give up 4.51% of portfolio value over 90 days.

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

Moodys  vs.  MSCI Inc

Moodys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Moodys has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Moodys is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

MSCI Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MSCI Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in May 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Moodys and MSCI

The main advantage of trading using opposite Moodys and MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Moodys 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 Moodys 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.