Correlation Between IShares MSCI and Invesco

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

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

Diversification Opportunities for IShares MSCI and Invesco

-0.04

Correlation Coefficient

IShares MSCI  Invesco

Good diversification

The 3 months correlation between IShares and Invesco is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI USA and Invesco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco and IShares 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 iShares MSCI USA are associated (or correlated) with Invesco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco has no effect on the direction of IShares MSCI i.e., IShares MSCI and Invesco go up and down completely randomly.

Pair Corralation between IShares MSCI and Invesco

Given the investment horizon of 90 days IShares MSCI is expected to generate 2.25 times less return on investment than Invesco. But when comparing it to its historical volatility, iShares MSCI USA is 2.48 times less risky than Invesco. It trades about 0.07 of its potential returns per unit of risk. Invesco is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,129  in Invesco on September 27, 2024 and sell it today you would earn a total of  424.27  from holding Invesco or generate 13.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	21.37%
Values	Daily Returns

iShares MSCI USA  vs.  Invesco

iShares MSCI USA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI USA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares MSCI is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Invesco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Invesco is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares MSCI and Invesco

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

The idea behind iShares MSCI USA and Invesco 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.