Correlation Between Invesco Golden and IShares MSCI

Can any of the company-specific risk be diversified away by investing in both Invesco Golden 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 Golden 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 Golden Dragon and iShares MSCI Hong, you can compare the effects of market volatilities on Invesco Golden 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 Golden with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Golden and IShares MSCI.

Diversification Opportunities for Invesco Golden and IShares MSCI

0.88

Correlation Coefficient

Invesco Golden  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 Golden Dragon and iShares MSCI Hong in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Hong and Invesco Golden 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 Golden Dragon 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 Hong has no effect on the direction of Invesco Golden i.e., Invesco Golden and IShares MSCI go up and down completely randomly.

Pair Corralation between Invesco Golden and IShares MSCI

Considering the 90-day investment horizon Invesco Golden Dragon is expected to generate 1.97 times more return on investment than IShares MSCI. However, Invesco Golden is 1.97 times more volatile than iShares MSCI Hong. It trades about 0.11 of its potential returns per unit of risk. iShares MSCI Hong is currently generating about 0.08 per unit of risk. If you would invest  2,599  in Invesco Golden Dragon on December 29, 2024 and sell it today you would earn a total of  376.00  from holding Invesco Golden Dragon or generate 14.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Invesco Golden Dragon  vs.  iShares MSCI Hong

Invesco Golden Dragon

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Golden Dragon are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady technical and fundamental indicators, Invesco Golden revealed solid returns over the last few months and may actually be approaching a breakup point.

iShares MSCI Hong

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Hong are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, IShares MSCI is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Invesco Golden and IShares MSCI

The main advantage of trading using opposite Invesco Golden and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Golden 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 Golden Dragon and iShares MSCI Hong 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.