Correlation Between IShares Core and Invesco International

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

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

Diversification Opportunities for IShares Core and Invesco International

0.96

Correlation Coefficient

IShares Core  Invesco International

Almost no diversification

The 3 months correlation between IShares and Invesco is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and Invesco International Develope in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco International and IShares Core 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 Core MSCI are associated (or correlated) with Invesco International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco International has no effect on the direction of IShares Core i.e., IShares Core and Invesco International go up and down completely randomly.

Pair Corralation between IShares Core and Invesco International

Given the investment horizon of 90 days iShares Core MSCI is expected to generate 0.93 times more return on investment than Invesco International. However, iShares Core MSCI is 1.08 times less risky than Invesco International. It trades about -0.05 of its potential returns per unit of risk. Invesco International Developed is currently generating about -0.05 per unit of risk. If you would invest  7,588  in iShares Core MSCI on September 3, 2024 and sell it today you would lose (223.00) from holding iShares Core MSCI or give up 2.94% of portfolio value over 90 days.

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

iShares Core MSCI  vs.  Invesco International Develope

iShares Core MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, IShares Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco International Developed has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Invesco International is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with IShares Core and Invesco International

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

The idea behind iShares Core MSCI and Invesco International Developed 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.