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 USA and Invesco SP 500, 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
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and Invesco is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI USA and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 500 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 USA 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 500 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 is expected to generate 1.05 times less return on investment than Invesco SP. But when comparing it to its historical volatility, iShares MSCI USA is 1.08 times less risky than Invesco SP. It trades about 0.21 of its potential returns per unit of risk. Invesco SP 500 is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 4,439 in Invesco SP 500 on August 29, 2024 and sell it today you would earn a total of 707.00 from holding Invesco SP 500 or generate 15.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI USA vs. Invesco SP 500
Performance |
| Timeline |
| iShares MSCI USA |
| Invesco SP 500 |
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. Invesco SP 500 | IShares MSCI vs. iShares MSCI EAFE | IShares MSCI vs. iShares MSCI USA | IShares MSCI vs. iShares MSCI USA |
| Invesco SP vs. SPDR Portfolio SP | Invesco SP vs. Schwab Dividend Equity | Invesco SP vs. Vanguard High Dividend | Invesco SP vs. iShares Core Dividend |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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