Correlation Between Invesco SP and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both Invesco SP and IShares 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 SP and IShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco SP International and iShares MSCI EAFE, you can compare the effects of market volatilities on Invesco SP and IShares 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 SP with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and IShares MSCI.
Diversification Opportunities for Invesco SP and IShares MSCI
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Invesco and IShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP International and iShares MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI EAFE and Invesco SP 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 SP International are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI EAFE has no effect on the direction of Invesco SP i.e., Invesco SP and IShares MSCI go up and down completely randomly.
Pair Corralation between Invesco SP and IShares MSCI
Given the investment horizon of 90 days Invesco SP is expected to generate 1.24 times less return on investment than IShares MSCI. But when comparing it to its historical volatility, Invesco SP International is 1.42 times less risky than IShares MSCI. It trades about 0.05 of its potential returns per unit of risk. iShares MSCI EAFE is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 8,596 in iShares MSCI EAFE on September 3, 2024 and sell it today you would earn a total of 1,585 from holding iShares MSCI EAFE or generate 18.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco SP International vs. iShares MSCI EAFE
Performance |
| Timeline |
| Invesco SP International |
| iShares MSCI EAFE |
Invesco SP and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco SP and IShares MSCI
The main advantage of trading using opposite Invesco SP and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco SP position performs unexpectedly, IShares 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 IShares MSCI will offset losses from the drop in IShares MSCI's long position.| Invesco SP vs. iShares Core SP | Invesco SP vs. iShares Core 1 5 | Invesco SP vs. iShares Core MSCI | Invesco SP vs. iShares Core MSCI |
| IShares MSCI vs. iShares MSCI EAFE | IShares MSCI vs. iShares MSCI EAFE | IShares MSCI vs. iShares Russell Mid Cap | IShares MSCI vs. iShares MSCI Netherlands |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. |