Correlation Between SPDR Kensho and Invesco MSCI

Can any of the company-specific risk be diversified away by investing in both SPDR Kensho and Invesco 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 SPDR Kensho and Invesco MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SPDR Kensho Clean and Invesco MSCI Sustainable, you can compare the effects of market volatilities on SPDR Kensho and Invesco 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 SPDR Kensho with a short position of Invesco MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Kensho and Invesco MSCI.

Diversification Opportunities for SPDR Kensho and Invesco MSCI

0.56

Correlation Coefficient

SPDR Kensho  Invesco MSCI

Very weak diversification

The 3 months correlation between SPDR and Invesco is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Kensho Clean and Invesco MSCI Sustainable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco MSCI Sustainable and SPDR Kensho 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 SPDR Kensho Clean are associated (or correlated) with Invesco MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco MSCI Sustainable has no effect on the direction of SPDR Kensho i.e., SPDR Kensho and Invesco MSCI go up and down completely randomly.

Pair Corralation between SPDR Kensho and Invesco MSCI

Given the investment horizon of 90 days SPDR Kensho Clean is expected to under-perform the Invesco MSCI. In addition to that, SPDR Kensho is 1.78 times more volatile than Invesco MSCI Sustainable. It trades about -0.11 of its total potential returns per unit of risk. Invesco MSCI Sustainable is currently generating about -0.05 per unit of volatility. If you would invest  4,115  in Invesco MSCI Sustainable on December 27, 2024 and sell it today you would lose (155.00) from holding Invesco MSCI Sustainable or give up 3.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

SPDR Kensho Clean  vs.  Invesco MSCI Sustainable

SPDR Kensho Clean

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Kensho Clean has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Etf's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the Exchange Traded Fund stockholders.

Invesco MSCI Sustainable

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco MSCI Sustainable has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Invesco MSCI is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with SPDR Kensho and Invesco MSCI

The main advantage of trading using opposite SPDR Kensho and Invesco MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Kensho position performs unexpectedly, Invesco 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 Invesco MSCI will offset losses from the drop in Invesco MSCI's long position.

The idea behind SPDR Kensho Clean and Invesco MSCI Sustainable 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.

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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.