Correlation Between IShares MSCI and Invesco SP
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and Invesco SP 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 SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI EAFE and Invesco SP SmallCap, you can compare the effects of market volatilities on IShares MSCI and Invesco SP 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 SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Invesco SP.
Diversification Opportunities for IShares MSCI and Invesco SP
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between IShares and Invesco is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI EAFE and Invesco SP SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP SmallCap 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 EAFE are associated (or correlated) with Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP SmallCap has no effect on the direction of IShares MSCI i.e., IShares MSCI and Invesco SP go up and down completely randomly.
Pair Corralation between IShares MSCI and Invesco SP
Considering the 90-day investment horizon iShares MSCI EAFE is expected to under-perform the Invesco SP. But the etf apears to be less risky and, when comparing its historical volatility, iShares MSCI EAFE is 2.22 times less risky than Invesco SP. The etf trades about -0.01 of its potential returns per unit of risk. The Invesco SP SmallCap is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 6,561 in Invesco SP SmallCap on September 4, 2024 and sell it today you would earn a total of 741.00 from holding Invesco SP SmallCap or generate 11.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
iShares MSCI EAFE vs. Invesco SP SmallCap
Performance |
| Timeline |
| iShares MSCI EAFE |
| Invesco SP SmallCap |
IShares MSCI and Invesco SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and Invesco SP
The main advantage of trading using opposite IShares MSCI and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, Invesco SP 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 SP will offset losses from the drop in Invesco SP's long position.| IShares MSCI vs. iShares MSCI Emerging | IShares MSCI vs. iShares Core Aggregate | IShares MSCI vs. iShares Russell 2000 | IShares MSCI vs. iShares MSCI Japan |
| Invesco SP vs. First Trust Mid | Invesco SP vs. First Trust Small | Invesco SP vs. First Trust Small | Invesco SP vs. First Trust Mid |
Check out your portfolio center.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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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