Correlation Between Invesco MSCI and First Trust

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

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

Diversification Opportunities for Invesco MSCI and First Trust

0.57

Correlation Coefficient

Invesco MSCI  First Trust

Very weak diversification

The 3 months correlation between Invesco and First is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Invesco MSCI Global and First Trust Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Materials and Invesco 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 Invesco MSCI Global are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Materials has no effect on the direction of Invesco MSCI i.e., Invesco MSCI and First Trust go up and down completely randomly.

Pair Corralation between Invesco MSCI and First Trust

Considering the 90-day investment horizon Invesco MSCI Global is expected to generate 0.77 times more return on investment than First Trust. However, Invesco MSCI Global is 1.29 times less risky than First Trust. It trades about 0.05 of its potential returns per unit of risk. First Trust Materials is currently generating about 0.0 per unit of risk. If you would invest  2,990  in Invesco MSCI Global on September 12, 2024 and sell it today you would earn a total of  441.00  from holding Invesco MSCI Global or generate 14.75% return on investment over 90 days.

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

Invesco MSCI Global  vs.  First Trust Materials

Invesco MSCI Global

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco MSCI Global are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Invesco MSCI is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

First Trust Materials

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Materials are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, First Trust is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invesco MSCI and First Trust

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

The idea behind Invesco MSCI Global and First Trust Materials 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.