Correlation Between Invesco MSCI and SPDR SP

Can any of the company-specific risk be diversified away by investing in both Invesco MSCI and SPDR 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 Invesco MSCI and SPDR SP 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 SPDR SP Global, you can compare the effects of market volatilities on Invesco MSCI and SPDR 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 Invesco MSCI with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco MSCI and SPDR SP.

Diversification Opportunities for Invesco MSCI and SPDR SP

0.67

Correlation Coefficient

Invesco MSCI  SPDR SP

Poor diversification

The 3 months correlation between Invesco and SPDR is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Invesco MSCI Global and SPDR SP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Global 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Global has no effect on the direction of Invesco MSCI i.e., Invesco MSCI and SPDR SP go up and down completely randomly.

Pair Corralation between Invesco MSCI and SPDR SP

Considering the 90-day investment horizon Invesco MSCI Global is expected to generate 0.91 times more return on investment than SPDR SP. However, Invesco MSCI Global is 1.1 times less risky than SPDR SP. It trades about 0.02 of its potential returns per unit of risk. SPDR SP Global is currently generating about 0.0 per unit of risk. If you would invest  2,970  in Invesco MSCI Global on September 19, 2024 and sell it today you would earn a total of  269.00  from holding Invesco MSCI Global or generate 9.06% return on investment over 90 days.

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

Invesco MSCI Global  vs.  SPDR SP Global

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.

SPDR SP Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SP Global has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Etf's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

Pair Trading with Invesco MSCI and SPDR SP

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

The idea behind Invesco MSCI Global and SPDR SP Global 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.