Correlation Between Invesco MSCI and Invesco Global

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

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

Diversification Opportunities for Invesco MSCI and Invesco Global

0.8

Correlation Coefficient

Invesco MSCI  Invesco Global

Very poor diversification

The 3 months correlation between Invesco and Invesco is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Invesco MSCI Europe and Invesco Global Buyback in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Global Buyback 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 Europe are associated (or correlated) with Invesco Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Global Buyback has no effect on the direction of Invesco MSCI i.e., Invesco MSCI and Invesco Global go up and down completely randomly.

Pair Corralation between Invesco MSCI and Invesco Global

Assuming the 90 days trading horizon Invesco MSCI Europe is expected to generate 0.85 times more return on investment than Invesco Global. However, Invesco MSCI Europe is 1.17 times less risky than Invesco Global. It trades about 0.11 of its potential returns per unit of risk. Invesco Global Buyback is currently generating about 0.04 per unit of risk. If you would invest  5,601  in Invesco MSCI Europe on December 24, 2024 and sell it today you would earn a total of  277.00  from holding Invesco MSCI Europe or generate 4.95% return on investment over 90 days.

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

Invesco MSCI Europe  vs.  Invesco Global Buyback

Invesco MSCI Europe

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco MSCI Europe are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Invesco MSCI is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Invesco Global Buyback

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Global Buyback are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Invesco Global is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Invesco MSCI and Invesco Global

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

The idea behind Invesco MSCI Europe and Invesco Global Buyback 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.