Correlation Between Invesco FTSE and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both Invesco FTSE 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 FTSE 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 FTSE RAFI and iShares MSCI EAFE, you can compare the effects of market volatilities on Invesco FTSE 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 FTSE with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco FTSE and IShares MSCI.
Diversification Opportunities for Invesco FTSE and IShares MSCI
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Invesco and IShares is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Invesco FTSE RAFI 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 FTSE 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 FTSE RAFI 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 FTSE i.e., Invesco FTSE and IShares MSCI go up and down completely randomly.
Pair Corralation between Invesco FTSE and IShares MSCI
Considering the 90-day investment horizon Invesco FTSE is expected to generate 1.27 times less return on investment than IShares MSCI. In addition to that, Invesco FTSE is 1.04 times more volatile than iShares MSCI EAFE. It trades about 0.03 of its total potential returns per unit of risk. iShares MSCI EAFE is currently generating about 0.05 per unit of volatility. If you would invest 5,071 in iShares MSCI EAFE on August 27, 2024 and sell it today you would earn a total of 329.00 from holding iShares MSCI EAFE or generate 6.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco FTSE RAFI vs. iShares MSCI EAFE
Performance |
| Timeline |
| Invesco FTSE RAFI |
| iShares MSCI EAFE |
Invesco FTSE and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco FTSE and IShares MSCI
The main advantage of trading using opposite Invesco FTSE and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco FTSE 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 FTSE vs. Dimensional Targeted Value | Invesco FTSE vs. Dimensional Small Cap | Invesco FTSE vs. Dimensional Marketwide Value | Invesco FTSE vs. Dimensional Core Equity |
| IShares MSCI vs. Dimensional Targeted Value | IShares MSCI vs. Dimensional Small Cap | IShares MSCI vs. Dimensional Marketwide Value | IShares MSCI vs. Dimensional Core Equity |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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