Correlation Between IShares Core and Invesco MSCI

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

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

Diversification Opportunities for IShares Core and Invesco MSCI

0.99

Correlation Coefficient

IShares Core  Invesco MSCI

No risk reduction

The 3 months correlation between IShares and Invesco is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and Invesco MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco MSCI USA and IShares Core 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 Core SP 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 USA has no effect on the direction of IShares Core i.e., IShares Core and Invesco MSCI go up and down completely randomly.

Pair Corralation between IShares Core and Invesco MSCI

Assuming the 90 days trading horizon IShares Core is expected to generate 1.01 times less return on investment than Invesco MSCI. But when comparing it to its historical volatility, iShares Core SP is 1.04 times less risky than Invesco MSCI. It trades about 0.11 of its potential returns per unit of risk. Invesco MSCI USA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  7,397  in Invesco MSCI USA on October 2, 2024 and sell it today you would earn a total of  1,592  from holding Invesco MSCI USA or generate 21.52% return on investment over 90 days.

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

iShares Core SP  vs.  Invesco MSCI USA

iShares Core SP

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares Core is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Invesco MSCI USA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco MSCI USA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Invesco MSCI is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares Core and Invesco MSCI

The main advantage of trading using opposite IShares Core and Invesco MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 iShares Core SP and Invesco MSCI USA 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.

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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.