Correlation Between Invesco MSCI and Invesco Markets

Can any of the company-specific risk be diversified away by investing in both Invesco MSCI and Invesco Markets 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 Markets 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 Markets plc, you can compare the effects of market volatilities on Invesco MSCI and Invesco Markets 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 Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco MSCI and Invesco Markets.

Diversification Opportunities for Invesco MSCI and Invesco Markets

0.74

Correlation Coefficient

Invesco MSCI  Invesco Markets

Poor diversification

The 3 months correlation between Invesco and Invesco is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Invesco MSCI Europe and Invesco Markets plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Markets plc 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 Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Markets plc has no effect on the direction of Invesco MSCI i.e., Invesco MSCI and Invesco Markets go up and down completely randomly.

Pair Corralation between Invesco MSCI and Invesco Markets

Assuming the 90 days trading horizon Invesco MSCI is expected to generate 1.03 times less return on investment than Invesco Markets. In addition to that, Invesco MSCI is 1.07 times more volatile than Invesco Markets plc. It trades about 0.05 of its total potential returns per unit of risk. Invesco Markets plc is currently generating about 0.06 per unit of volatility. If you would invest  8,906  in Invesco Markets plc on October 24, 2024 and sell it today you would earn a total of  1,866  from holding Invesco Markets plc or generate 20.95% return on investment over 90 days.

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

Invesco MSCI Europe  vs.  Invesco Markets plc

Invesco MSCI Europe

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco MSCI Europe are ranked lower than 3 (%) 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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Invesco Markets plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Markets plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Invesco Markets is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Invesco MSCI and Invesco Markets

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

The idea behind Invesco MSCI Europe and Invesco Markets plc 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.