Correlation Between Invesco International and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both Invesco International 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 International 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 International Developed and iShares MSCI Intl, you can compare the effects of market volatilities on Invesco International 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 International with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco International and IShares MSCI.
Diversification Opportunities for Invesco International and IShares MSCI
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Invesco and IShares is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Invesco International Develope and iShares MSCI Intl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Intl and Invesco International 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 International Developed 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 Intl has no effect on the direction of Invesco International i.e., Invesco International and IShares MSCI go up and down completely randomly.
Pair Corralation between Invesco International and IShares MSCI
Given the investment horizon of 90 days Invesco International Developed is expected to under-perform the IShares MSCI. But the etf apears to be less risky and, when comparing its historical volatility, Invesco International Developed is 1.05 times less risky than IShares MSCI. The etf trades about -0.06 of its potential returns per unit of risk. The iShares MSCI Intl is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,339 in iShares MSCI Intl on December 31, 2024 and sell it today you would earn a total of 60.00 from holding iShares MSCI Intl or generate 1.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco International Develope vs. iShares MSCI Intl
Performance |
| Timeline |
| Invesco International |
| iShares MSCI Intl |
Invesco International and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco International and IShares MSCI
The main advantage of trading using opposite Invesco International and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco International 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.The idea behind Invesco International Developed and iShares MSCI Intl 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.
| IShares MSCI vs. iShares Currency Hedged | IShares MSCI vs. iShares MSCI USA | IShares MSCI vs. iShares Edge MSCI | IShares MSCI vs. iShares MSCI Intl |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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