Correlation Between Xtrackers MSCI and Invesco Markets

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

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

Diversification Opportunities for Xtrackers MSCI and Invesco Markets

-0.7

Correlation Coefficient

Xtrackers MSCI  Invesco Markets

Excellent diversification

The 3 months correlation between Xtrackers and Invesco is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI World and Invesco Markets II in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Markets II and Xtrackers 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 Xtrackers MSCI World are associated (or correlated) with Invesco Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Markets II has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and Invesco Markets go up and down completely randomly.

Pair Corralation between Xtrackers MSCI and Invesco Markets

Assuming the 90 days trading horizon Xtrackers MSCI World is expected to generate 0.62 times more return on investment than Invesco Markets. However, Xtrackers MSCI World is 1.6 times less risky than Invesco Markets. It trades about -0.14 of its potential returns per unit of risk. Invesco Markets II is currently generating about -0.09 per unit of risk. If you would invest  9,306  in Xtrackers MSCI World on October 16, 2024 and sell it today you would lose (246.00) from holding Xtrackers MSCI World or give up 2.64% of portfolio value over 90 days.

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

Xtrackers MSCI World  vs.  Invesco Markets II

Xtrackers MSCI World

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI World are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Xtrackers MSCI may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Invesco Markets II

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Markets II has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Etf's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with Xtrackers MSCI and Invesco Markets

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

The idea behind Xtrackers MSCI World and Invesco Markets II 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.

Check out your portfolio center.

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 Anywhere module to track or share privately all of your investments from the convenience of any device.