Correlation Between Invesco JPX and Invesco MSCI

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Can any of the company-specific risk be diversified away by investing in both Invesco JPX 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 Invesco JPX and Invesco MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco JPX Nikkei 400 and Invesco MSCI Europe, you can compare the effects of market volatilities on Invesco JPX 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 Invesco JPX with a short position of Invesco MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco JPX and Invesco MSCI.

Diversification Opportunities for Invesco JPX and Invesco MSCI

InvescoInvescoDiversified AwayInvescoInvescoDiversified Away100%
0.43
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Invesco and Invesco is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Invesco JPX Nikkei 400 and Invesco MSCI Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco MSCI Europe and Invesco JPX 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 JPX Nikkei 400 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 Europe has no effect on the direction of Invesco JPX i.e., Invesco JPX and Invesco MSCI go up and down completely randomly.

Pair Corralation between Invesco JPX and Invesco MSCI

Assuming the 90 days trading horizon Invesco JPX Nikkei 400 is expected to generate 1.14 times more return on investment than Invesco MSCI. However, Invesco JPX is 1.14 times more volatile than Invesco MSCI Europe. It trades about 0.01 of its potential returns per unit of risk. Invesco MSCI Europe is currently generating about -0.03 per unit of risk. If you would invest  18,488  in Invesco JPX Nikkei 400 on September 22, 2024 and sell it today you would earn a total of  20.00  from holding Invesco JPX Nikkei 400 or generate 0.11% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Invesco JPX Nikkei 400  vs.  Invesco MSCI Europe

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -2024
JavaScript chart by amCharts 3.21.15SMLN ICFP
       Timeline  
Invesco JPX Nikkei 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Invesco JPX Nikkei 400 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Invesco JPX is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec178180182184186188190192194
Invesco MSCI Europe 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Invesco MSCI Europe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Invesco MSCI is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec5555.55656.55757.558

Invesco JPX and Invesco MSCI Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.7-2.02-1.35-0.670.00.681.362.052.74 0.10.20.30.40.50.60.7
JavaScript chart by amCharts 3.21.15SMLN ICFP
       Returns  

Pair Trading with Invesco JPX and Invesco MSCI

The main advantage of trading using opposite Invesco JPX and Invesco MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco JPX 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 Invesco JPX Nikkei 400 and Invesco MSCI Europe 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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