Correlation Between IShares MSCI and Invesco Golden

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

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

Diversification Opportunities for IShares MSCI and Invesco Golden

0.09

Correlation Coefficient

IShares MSCI  Invesco Golden

Significant diversification

The 3 months correlation between IShares and Invesco is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Taiwan and Invesco Golden Dragon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Golden Dragon 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 Taiwan are associated (or correlated) with Invesco Golden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Golden Dragon has no effect on the direction of IShares MSCI i.e., IShares MSCI and Invesco Golden go up and down completely randomly.

Pair Corralation between IShares MSCI and Invesco Golden

Considering the 90-day investment horizon iShares MSCI Taiwan is expected to under-perform the Invesco Golden. But the etf apears to be less risky and, when comparing its historical volatility, iShares MSCI Taiwan is 1.83 times less risky than Invesco Golden. The etf trades about -0.07 of its potential returns per unit of risk. The Invesco Golden Dragon is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  2,784  in Invesco Golden Dragon on September 26, 2024 and sell it today you would lose (101.00) from holding Invesco Golden Dragon or give up 3.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

iShares MSCI Taiwan  vs.  Invesco Golden Dragon

iShares MSCI Taiwan

Risk-Adjusted Performance

0 of 100

Very Weak

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

Invesco Golden Dragon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Golden Dragon has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady technical and fundamental indicators, Invesco Golden is not utilizing all of its potentials. The recent stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with IShares MSCI and Invesco Golden

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

The idea behind iShares MSCI Taiwan and Invesco Golden Dragon 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.