Correlation Between MSCI ACWI and Value Fund

Can any of the company-specific risk be diversified away by investing in both MSCI ACWI and Value Fund 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 Value Fund 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 Value Fund Value, you can compare the effects of market volatilities on MSCI ACWI and Value Fund 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 Value Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of MSCI ACWI and Value Fund.

Diversification Opportunities for MSCI ACWI and Value Fund

0.58

Correlation Coefficient

MSCI ACWI  Value Fund

Very weak diversification

The 3 months correlation between MSCI and Value is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding MSCI ACWI exAUCONSUMER and Value Fund Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Fund Value 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 Value Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Fund Value has no effect on the direction of MSCI ACWI i.e., MSCI ACWI and Value Fund go up and down completely randomly.

Pair Corralation between MSCI ACWI and Value Fund

Assuming the 90 days horizon MSCI ACWI exAUCONSUMER is expected to generate 0.13 times more return on investment than Value Fund. However, MSCI ACWI exAUCONSUMER is 7.63 times less risky than Value Fund. It trades about 0.12 of its potential returns per unit of risk. Value Fund Value is currently generating about -0.01 per unit of risk. If you would invest  2,457  in MSCI ACWI exAUCONSUMER on March 1, 2025 and sell it today you would earn a total of  42.00  from holding MSCI ACWI exAUCONSUMER or generate 1.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

MSCI ACWI exAUCONSUMER  vs.  Value Fund Value

MSCI ACWI exAUCONSUMER

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MSCI ACWI exAUCONSUMER are ranked lower than 9 (%) 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.

Value Fund Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Value Fund Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Value Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MSCI ACWI and Value Fund

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

The idea behind MSCI ACWI exAUCONSUMER and Value Fund Value 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.