Correlation Between Xtrackers MSCI and Invesco EQQQ

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

By analyzing existing cross correlation between Xtrackers MSCI and Invesco EQQQ NASDAQ 100, you can compare the effects of market volatilities on Xtrackers MSCI and Invesco EQQQ 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 Xtrackers MSCI with a short position of Invesco EQQQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers MSCI and Invesco EQQQ.

Diversification Opportunities for Xtrackers MSCI and Invesco EQQQ

0.77

Correlation Coefficient

Xtrackers MSCI  Invesco EQQQ

Poor diversification

The 3 months correlation between Xtrackers and Invesco is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI and Invesco EQQQ NASDAQ 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco EQQQ NASDAQ and Xtrackers 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 Xtrackers MSCI are associated (or correlated) with Invesco EQQQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco EQQQ NASDAQ has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and Invesco EQQQ go up and down completely randomly.

Pair Corralation between Xtrackers MSCI and Invesco EQQQ

Assuming the 90 days trading horizon Xtrackers MSCI is expected to generate 0.41 times more return on investment than Invesco EQQQ. However, Xtrackers MSCI is 2.42 times less risky than Invesco EQQQ. It trades about -0.39 of its potential returns per unit of risk. Invesco EQQQ NASDAQ 100 is currently generating about -0.23 per unit of risk. If you would invest  3,407  in Xtrackers MSCI on October 16, 2024 and sell it today you would lose (145.00) from holding Xtrackers MSCI or give up 4.26% of portfolio value over 90 days.

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

Xtrackers MSCI  vs.  Invesco EQQQ NASDAQ 100

Xtrackers MSCI

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Xtrackers MSCI is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Invesco EQQQ NASDAQ

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco EQQQ NASDAQ 100 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Invesco EQQQ is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Xtrackers MSCI and Invesco EQQQ

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

The idea behind Xtrackers MSCI and Invesco EQQQ NASDAQ 100 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.