Correlation Between Invesco MSCI and VanEck Vectors

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

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

Diversification Opportunities for Invesco MSCI and VanEck Vectors

0.61

Correlation Coefficient

Invesco MSCI  VanEck Vectors

Poor diversification

The 3 months correlation between Invesco and VanEck is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Invesco MSCI Japan and VanEck Vectors UCITS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Vectors UCITS 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 Japan are associated (or correlated) with VanEck Vectors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Vectors UCITS has no effect on the direction of Invesco MSCI i.e., Invesco MSCI and VanEck Vectors go up and down completely randomly.

Pair Corralation between Invesco MSCI and VanEck Vectors

Assuming the 90 days trading horizon Invesco MSCI Japan is expected to generate 1.3 times more return on investment than VanEck Vectors. However, Invesco MSCI is 1.3 times more volatile than VanEck Vectors UCITS. It trades about 0.15 of its potential returns per unit of risk. VanEck Vectors UCITS is currently generating about 0.17 per unit of risk. If you would invest  7,522  in Invesco MSCI Japan on September 18, 2024 and sell it today you would earn a total of  216.00  from holding Invesco MSCI Japan or generate 2.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Invesco MSCI Japan  vs.  VanEck Vectors UCITS

Invesco MSCI Japan

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco MSCI Japan are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Invesco MSCI is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

VanEck Vectors UCITS

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Vectors UCITS are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, VanEck Vectors may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Invesco MSCI and VanEck Vectors

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

The idea behind Invesco MSCI Japan and VanEck Vectors UCITS 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.