Correlation Between Invesco International and IShares MSCI

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

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

Diversification Opportunities for Invesco International and IShares MSCI

0.88

Correlation Coefficient

Invesco International  IShares MSCI

Very poor diversification

The 3 months correlation between Invesco and IShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Invesco International BuyBack and iShares MSCI Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Europe and Invesco International 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 International BuyBack are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Europe has no effect on the direction of Invesco International i.e., Invesco International and IShares MSCI go up and down completely randomly.

Pair Corralation between Invesco International and IShares MSCI

Given the investment horizon of 90 days Invesco International BuyBack is expected to generate 0.85 times more return on investment than IShares MSCI. However, Invesco International BuyBack is 1.18 times less risky than IShares MSCI. It trades about 0.04 of its potential returns per unit of risk. iShares MSCI Europe is currently generating about 0.01 per unit of risk. If you would invest  3,383  in Invesco International BuyBack on October 22, 2024 and sell it today you would earn a total of  674.00  from holding Invesco International BuyBack or generate 19.92% return on investment over 90 days.

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

Invesco International BuyBack  vs.  iShares MSCI Europe

Invesco International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco International BuyBack has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward-looking signals, Invesco International is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

iShares MSCI Europe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI Europe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with Invesco International and IShares MSCI

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

The idea behind Invesco International BuyBack and iShares MSCI Europe 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.