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 International, 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
0.96 | Correlation Coefficient |
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 MSCI EAFE and Invesco SP International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP International 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 International 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
Given the investment horizon of 90 days 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 1.03 times less risky than Invesco SP. The etf trades about -0.21 of its potential returns per unit of risk. The Invesco SP International is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest 2,952 in Invesco SP International on August 29, 2024 and sell it today you would lose (75.00) from holding Invesco SP International or give up 2.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI EAFE vs. Invesco SP International
Performance |
| Timeline |
| iShares MSCI EAFE |
| Invesco SP International |
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. Dimensional Core Equity | IShares MSCI vs. Dimensional Emerging Core | IShares MSCI vs. Dimensional Targeted Value | IShares MSCI vs. Dimensional Small Cap |
| Invesco SP vs. Dimensional Core Equity | Invesco SP vs. Dimensional Emerging Core | Invesco SP vs. Dimensional Targeted Value | Invesco SP vs. Dimensional Small Cap |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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