Correlation Between Xtrackers MSCI and Invesco Us

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

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

Diversification Opportunities for Xtrackers MSCI and Invesco Us

0.61

Correlation Coefficient

Xtrackers MSCI  Invesco Us

Poor diversification

The 3 months correlation between Xtrackers and Invesco is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI and Invesco Us Treasury in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Us Treasury and Xtrackers 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 Xtrackers MSCI are associated (or correlated) with Invesco Us. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Us Treasury has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and Invesco Us go up and down completely randomly.

Pair Corralation between Xtrackers MSCI and Invesco Us

Assuming the 90 days trading horizon Xtrackers MSCI is expected to generate 1.97 times more return on investment than Invesco Us. However, Xtrackers MSCI is 1.97 times more volatile than Invesco Us Treasury. It trades about 0.17 of its potential returns per unit of risk. Invesco Us Treasury is currently generating about -0.1 per unit of risk. If you would invest  3,247  in Xtrackers MSCI on September 25, 2024 and sell it today you would earn a total of  75.00  from holding Xtrackers MSCI or generate 2.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	81.82%
Values	Daily Returns

Xtrackers MSCI  vs.  Invesco Us Treasury

Xtrackers MSCI

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Xtrackers MSCI is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Invesco Us Treasury

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Us Treasury are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Invesco Us is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Xtrackers MSCI and Invesco Us

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

The idea behind Xtrackers MSCI and Invesco Us Treasury 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.