Correlation Between Invesco DB and Invesco MSCI

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

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

Diversification Opportunities for Invesco DB and Invesco MSCI

-0.16

Correlation Coefficient

Invesco DB  Invesco MSCI

Good diversification

The 3 months correlation between Invesco and Invesco is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DB Base and Invesco MSCI Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco MSCI Global and Invesco DB 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 DB Base 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 Global has no effect on the direction of Invesco DB i.e., Invesco DB and Invesco MSCI go up and down completely randomly.

Pair Corralation between Invesco DB and Invesco MSCI

Considering the 90-day investment horizon Invesco DB Base is expected to generate 0.86 times more return on investment than Invesco MSCI. However, Invesco DB Base is 1.16 times less risky than Invesco MSCI. It trades about 0.06 of its potential returns per unit of risk. Invesco MSCI Global is currently generating about -0.03 per unit of risk. If you would invest  1,896  in Invesco DB Base on December 28, 2024 and sell it today you would earn a total of  51.00  from holding Invesco DB Base or generate 2.69% return on investment over 90 days.

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

Invesco DB Base  vs.  Invesco MSCI Global

Invesco DB Base

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DB Base are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Invesco DB is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Invesco MSCI Global

Risk-Adjusted Performance

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.

Pair Trading with Invesco DB and Invesco MSCI

The main advantage of trading using opposite Invesco DB and Invesco MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco DB 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 Invesco DB Base and Invesco MSCI 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..