Correlation Between Invesco MSCI and Invesco EURO

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

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

Diversification Opportunities for Invesco MSCI and Invesco EURO

0.35

Correlation Coefficient

Invesco MSCI  Invesco EURO

Weak diversification

The 3 months correlation between Invesco and Invesco is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Invesco MSCI Emerging and Invesco EURO STOXX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco EURO STOXX 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 Emerging are associated (or correlated) with Invesco EURO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco EURO STOXX has no effect on the direction of Invesco MSCI i.e., Invesco MSCI and Invesco EURO go up and down completely randomly.

Pair Corralation between Invesco MSCI and Invesco EURO

Assuming the 90 days trading horizon Invesco MSCI Emerging is expected to generate 0.79 times more return on investment than Invesco EURO. However, Invesco MSCI Emerging is 1.26 times less risky than Invesco EURO. It trades about 0.11 of its potential returns per unit of risk. Invesco EURO STOXX is currently generating about -0.01 per unit of risk. If you would invest  262,100  in Invesco MSCI Emerging on September 5, 2024 and sell it today you would earn a total of  16,250  from holding Invesco MSCI Emerging or generate 6.2% return on investment over 90 days.

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

Invesco MSCI Emerging  vs.  Invesco EURO STOXX

Invesco MSCI Emerging

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco MSCI Emerging are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Invesco MSCI is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Invesco EURO STOXX

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Invesco MSCI and Invesco EURO

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

The idea behind Invesco MSCI Emerging and Invesco EURO STOXX 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.