Correlation Between Invesco MSCI and JPMorgan Climate

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

By analyzing existing cross correlation between Invesco MSCI Sustainable and JPMorgan Climate Change, you can compare the effects of market volatilities on Invesco MSCI and JPMorgan Climate 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 JPMorgan Climate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco MSCI and JPMorgan Climate.

Diversification Opportunities for Invesco MSCI and JPMorgan Climate

0.79

Correlation Coefficient

Invesco MSCI  JPMorgan Climate

Poor diversification

The 3 months correlation between Invesco and JPMorgan is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Invesco MSCI Sustainable and JPMorgan Climate Change in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Climate Change 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 Sustainable are associated (or correlated) with JPMorgan Climate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Climate Change has no effect on the direction of Invesco MSCI i.e., Invesco MSCI and JPMorgan Climate go up and down completely randomly.

Pair Corralation between Invesco MSCI and JPMorgan Climate

Given the investment horizon of 90 days Invesco MSCI Sustainable is expected to generate 1.45 times more return on investment than JPMorgan Climate. However, Invesco MSCI is 1.45 times more volatile than JPMorgan Climate Change. It trades about -0.02 of its potential returns per unit of risk. JPMorgan Climate Change is currently generating about -0.04 per unit of risk. If you would invest  4,291  in Invesco MSCI Sustainable on September 14, 2024 and sell it today you would lose (71.00) from holding Invesco MSCI Sustainable or give up 1.65% of portfolio value over 90 days.

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

Invesco MSCI Sustainable  vs.  JPMorgan Climate Change

Invesco MSCI Sustainable

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco MSCI Sustainable has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Invesco MSCI is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

JPMorgan Climate Change

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JPMorgan Climate Change has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable primary indicators, JPMorgan Climate is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Invesco MSCI and JPMorgan Climate

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

The idea behind Invesco MSCI Sustainable and JPMorgan Climate Change 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.