Correlation Between VanEck Low and Invesco MSCI

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

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

Diversification Opportunities for VanEck Low and Invesco MSCI

0.88

Correlation Coefficient

VanEck Low  Invesco MSCI

Very poor diversification

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

Pair Corralation between VanEck Low and Invesco MSCI

Given the investment horizon of 90 days VanEck Low Carbon is expected to generate 0.87 times more return on investment than Invesco MSCI. However, VanEck Low Carbon is 1.15 times less risky than Invesco MSCI. It trades about 0.28 of its potential returns per unit of risk. Invesco MSCI Sustainable is currently generating about 0.12 per unit of risk. If you would invest  9,911  in VanEck Low Carbon on September 15, 2024 and sell it today you would earn a total of  488.00  from holding VanEck Low Carbon or generate 4.92% return on investment over 90 days.

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

VanEck Low Carbon  vs.  Invesco MSCI Sustainable

VanEck Low Carbon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Low Carbon has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, VanEck Low is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Invesco MSCI Sustainable

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco MSCI Sustainable has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Invesco MSCI is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with VanEck Low and Invesco MSCI

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

The idea behind VanEck Low Carbon and Invesco MSCI Sustainable 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.