Correlation Between SPDR MSCI and Invesco CoinShares

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

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

Diversification Opportunities for SPDR MSCI and Invesco CoinShares

0.85

Correlation Coefficient

SPDR MSCI  Invesco CoinShares

Very poor diversification

The 3 months correlation between SPDR and Invesco is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI World and Invesco CoinShares Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco CoinShares Global and SPDR 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 SPDR MSCI World are associated (or correlated) with Invesco CoinShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco CoinShares Global has no effect on the direction of SPDR MSCI i.e., SPDR MSCI and Invesco CoinShares go up and down completely randomly.

Pair Corralation between SPDR MSCI and Invesco CoinShares

Assuming the 90 days trading horizon SPDR MSCI World is expected to generate 0.58 times more return on investment than Invesco CoinShares. However, SPDR MSCI World is 1.71 times less risky than Invesco CoinShares. It trades about 0.12 of its potential returns per unit of risk. Invesco CoinShares Global is currently generating about 0.07 per unit of risk. If you would invest  8,985  in SPDR MSCI World on September 29, 2024 and sell it today you would earn a total of  9,171  from holding SPDR MSCI World or generate 102.07% return on investment over 90 days.

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

SPDR MSCI World  vs.  Invesco CoinShares Global

SPDR MSCI World

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR MSCI World are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SPDR MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Invesco CoinShares Global

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco CoinShares Global are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Invesco CoinShares showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPDR MSCI and Invesco CoinShares

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

The idea behind SPDR MSCI World and Invesco CoinShares Global 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.