Correlation Between Invesco MSCI and Invesco FTSE
Can any of the company-specific risk be diversified away by investing in both Invesco MSCI and Invesco FTSE 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 MSCI and Invesco FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco MSCI Emerging and Invesco FTSE Emerging, you can compare the effects of market volatilities on Invesco MSCI and Invesco FTSE 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 MSCI with a short position of Invesco FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco MSCI and Invesco FTSE.
Diversification Opportunities for Invesco MSCI and Invesco FTSE
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Invesco and Invesco is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Invesco MSCI Emerging and Invesco FTSE Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco FTSE Emerging and Invesco 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 Invesco MSCI Emerging are associated (or correlated) with Invesco FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco FTSE Emerging has no effect on the direction of Invesco MSCI i.e., Invesco MSCI and Invesco FTSE go up and down completely randomly.
Pair Corralation between Invesco MSCI and Invesco FTSE
Assuming the 90 days trading horizon Invesco MSCI Emerging is expected to generate 0.65 times more return on investment than Invesco FTSE. However, Invesco MSCI Emerging is 1.53 times less risky than Invesco FTSE. It trades about -0.07 of its potential returns per unit of risk. Invesco FTSE Emerging is currently generating about -0.11 per unit of risk. If you would invest 280,100 in Invesco MSCI Emerging on September 1, 2024 and sell it today you would lose (3,175) from holding Invesco MSCI Emerging or give up 1.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco MSCI Emerging vs. Invesco FTSE Emerging
Performance |
| Timeline |
| Invesco MSCI Emerging |
| Invesco FTSE Emerging |
Invesco MSCI and Invesco FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco MSCI and Invesco FTSE
The main advantage of trading using opposite Invesco MSCI and Invesco FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco MSCI position performs unexpectedly, Invesco FTSE 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 FTSE will offset losses from the drop in Invesco FTSE's long position.| Invesco MSCI vs. Invesco EURO STOXX | Invesco MSCI vs. Invesco Markets Plc | Invesco MSCI vs. Invesco FTSE RAFI | Invesco MSCI vs. Invesco FTSE Emerging |
| Invesco FTSE vs. Invesco MSCI Emerging | Invesco FTSE vs. Invesco EURO STOXX | Invesco FTSE vs. Invesco Markets Plc | Invesco FTSE vs. Invesco FTSE RAFI |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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