Correlation Between SPDR Barclays and Invesco MSCI

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

By analyzing existing cross correlation between SPDR Barclays 10 and Invesco MSCI Emerging, you can compare the effects of market volatilities on SPDR Barclays and Invesco 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 SPDR Barclays with a short position of Invesco MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Barclays and Invesco MSCI.

Diversification Opportunities for SPDR Barclays and Invesco MSCI

-0.64

Correlation Coefficient

SPDR Barclays  Invesco MSCI

Excellent diversification

The 3 months correlation between SPDR and Invesco is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Barclays 10 and Invesco MSCI Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco MSCI Emerging and SPDR Barclays 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 SPDR Barclays 10 are associated (or correlated) with Invesco MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco MSCI Emerging has no effect on the direction of SPDR Barclays i.e., SPDR Barclays and Invesco MSCI go up and down completely randomly.

Pair Corralation between SPDR Barclays and Invesco MSCI

Assuming the 90 days trading horizon SPDR Barclays 10 is expected to under-perform the Invesco MSCI. But the etf apears to be less risky and, when comparing its historical volatility, SPDR Barclays 10 is 3.76 times less risky than Invesco MSCI. The etf trades about 0.0 of its potential returns per unit of risk. The Invesco MSCI Emerging is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  250,850  in Invesco MSCI Emerging on September 12, 2024 and sell it today you would earn a total of  28,850  from holding Invesco MSCI Emerging or generate 11.5% return on investment over 90 days.

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

SPDR Barclays 10  vs.  Invesco MSCI Emerging

SPDR Barclays 10

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Barclays 10 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SPDR Barclays is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Invesco MSCI Emerging

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco MSCI Emerging are ranked lower than 8 (%) 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SPDR Barclays and Invesco MSCI

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

The idea behind SPDR Barclays 10 and Invesco MSCI Emerging 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.