Correlation Between Invesco Exchange and IShares MSCI

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

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

Diversification Opportunities for Invesco Exchange and IShares MSCI

-0.25

Correlation Coefficient

Invesco Exchange  IShares MSCI

Very good diversification

The 3 months correlation between Invesco and IShares is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Exchange Traded and iShares MSCI China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI China and Invesco Exchange 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 Invesco Exchange Traded are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI China has no effect on the direction of Invesco Exchange i.e., Invesco Exchange and IShares MSCI go up and down completely randomly.

Pair Corralation between Invesco Exchange and IShares MSCI

Given the investment horizon of 90 days Invesco Exchange Traded is expected to under-perform the IShares MSCI. But the etf apears to be less risky and, when comparing its historical volatility, Invesco Exchange Traded is 4.71 times less risky than IShares MSCI. The etf trades about -0.1 of its potential returns per unit of risk. The iShares MSCI China is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,247  in iShares MSCI China on September 21, 2024 and sell it today you would earn a total of  481.00  from holding iShares MSCI China or generate 11.33% return on investment over 90 days.

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

Invesco Exchange Traded  vs.  iShares MSCI China

Invesco Exchange Traded

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Exchange Traded has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Invesco Exchange is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

iShares MSCI China

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI China are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, IShares MSCI demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invesco Exchange and IShares MSCI

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

The idea behind Invesco Exchange Traded and iShares MSCI China 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.