Correlation Between Invesco MSCI and WisdomTree Continuous

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

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

Diversification Opportunities for Invesco MSCI and WisdomTree Continuous

-0.06

Correlation Coefficient

Invesco MSCI  WisdomTree Continuous

Good diversification

The 3 months correlation between Invesco and WisdomTree is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Invesco MSCI Global and WisdomTree Continuous Commodit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Continuous and Invesco 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 Invesco MSCI Global are associated (or correlated) with WisdomTree Continuous. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Continuous has no effect on the direction of Invesco MSCI i.e., Invesco MSCI and WisdomTree Continuous go up and down completely randomly.

Pair Corralation between Invesco MSCI and WisdomTree Continuous

Considering the 90-day investment horizon Invesco MSCI is expected to generate 1.25 times less return on investment than WisdomTree Continuous. In addition to that, Invesco MSCI is 1.2 times more volatile than WisdomTree Continuous Commodity. It trades about 0.02 of its total potential returns per unit of risk. WisdomTree Continuous Commodity is currently generating about 0.03 per unit of volatility. If you would invest  1,711  in WisdomTree Continuous Commodity on September 19, 2024 and sell it today you would earn a total of  220.00  from holding WisdomTree Continuous Commodity or generate 12.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Invesco MSCI Global  vs.  WisdomTree Continuous Commodit

Invesco MSCI Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco MSCI Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Invesco MSCI is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

WisdomTree Continuous

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Continuous Commodity are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, WisdomTree Continuous is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Invesco MSCI and WisdomTree Continuous

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

The idea behind Invesco MSCI Global and WisdomTree Continuous Commodity 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.