Correlation Between IShares MSCI and Invesco Equal

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

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

Diversification Opportunities for IShares MSCI and Invesco Equal

0.02

Correlation Coefficient

IShares MSCI  Invesco Equal

Significant diversification

The 3 months correlation between IShares and Invesco is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Canada and Invesco Equal Weight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Equal Weight and IShares 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 iShares MSCI Canada are associated (or correlated) with Invesco Equal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Equal Weight has no effect on the direction of IShares MSCI i.e., IShares MSCI and Invesco Equal go up and down completely randomly.

Pair Corralation between IShares MSCI and Invesco Equal

Considering the 90-day investment horizon IShares MSCI is expected to generate 2.05 times less return on investment than Invesco Equal. In addition to that, IShares MSCI is 2.05 times more volatile than Invesco Equal Weight. It trades about 0.02 of its total potential returns per unit of risk. Invesco Equal Weight is currently generating about 0.1 per unit of volatility. If you would invest  2,684  in Invesco Equal Weight on December 29, 2024 and sell it today you would earn a total of  82.89  from holding Invesco Equal Weight or generate 3.09% return on investment over 90 days.

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

iShares MSCI Canada  vs.  Invesco Equal Weight

iShares MSCI Canada

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Canada are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, IShares MSCI is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Invesco Equal Weight

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Equal Weight are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Invesco Equal is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with IShares MSCI and Invesco Equal

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

The idea behind iShares MSCI Canada and Invesco Equal Weight 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.