Correlation Between SP Global and MSCI

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

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

Diversification Opportunities for SP Global and MSCI

0.69

Correlation Coefficient

SP Global  MSCI

Poor diversification

The 3 months correlation between SPGI and MSCI is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding SP Global and MSCI Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSCI Inc and SP Global 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 SP Global 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 SP Global i.e., SP Global and MSCI go up and down completely randomly.

Pair Corralation between SP Global and MSCI

Given the investment horizon of 90 days SP Global is expected to generate 0.26 times more return on investment than MSCI. However, SP Global is 3.87 times less risky than MSCI. It trades about -0.13 of its potential returns per unit of risk. MSCI Inc is currently generating about -0.18 per unit of risk. If you would invest  42,709  in SP Global on January 30, 2024 and sell it today you would lose (1,103) from holding SP Global or give up 2.58% of portfolio value over 90 days.

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

SP Global  vs.  MSCI Inc

SP Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SP Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

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 SP Global and MSCI

The main advantage of trading using opposite SP Global and MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SP Global 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 SP Global 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.