Correlation Between Invesco Dynamic and KraneShares MSCI

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

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

Diversification Opportunities for Invesco Dynamic and KraneShares MSCI

-0.07

Correlation Coefficient

Invesco Dynamic  KraneShares MSCI

Good diversification

The 3 months correlation between Invesco and KraneShares is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Dynamic Leisure and KraneShares MSCI One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares MSCI One and Invesco Dynamic 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 Dynamic Leisure are associated (or correlated) with KraneShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares MSCI One has no effect on the direction of Invesco Dynamic i.e., Invesco Dynamic and KraneShares MSCI go up and down completely randomly.

Pair Corralation between Invesco Dynamic and KraneShares MSCI

Considering the 90-day investment horizon Invesco Dynamic Leisure is expected to generate 0.56 times more return on investment than KraneShares MSCI. However, Invesco Dynamic Leisure is 1.78 times less risky than KraneShares MSCI. It trades about 0.27 of its potential returns per unit of risk. KraneShares MSCI One is currently generating about 0.05 per unit of risk. If you would invest  4,611  in Invesco Dynamic Leisure on September 13, 2024 and sell it today you would earn a total of  819.00  from holding Invesco Dynamic Leisure or generate 17.76% return on investment over 90 days.

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

Invesco Dynamic Leisure  vs.  KraneShares MSCI One

Invesco Dynamic Leisure

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Dynamic Leisure are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Invesco Dynamic revealed solid returns over the last few months and may actually be approaching a breakup point.

KraneShares MSCI One

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares MSCI One are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, KraneShares MSCI is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Invesco Dynamic and KraneShares MSCI

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

The idea behind Invesco Dynamic Leisure and KraneShares MSCI One 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.