Correlation Between Materials Select and Invesco MSCI

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

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

Diversification Opportunities for Materials Select and Invesco MSCI

0.73

Correlation Coefficient

Materials Select  Invesco MSCI

Poor diversification

The 3 months correlation between Materials and Invesco is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Materials Select Sector and Invesco MSCI Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco MSCI Global and Materials Select 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 Materials Select Sector 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 Global has no effect on the direction of Materials Select i.e., Materials Select and Invesco MSCI go up and down completely randomly.

Pair Corralation between Materials Select and Invesco MSCI

Considering the 90-day investment horizon Materials Select Sector is expected to generate 1.02 times more return on investment than Invesco MSCI. However, Materials Select is 1.02 times more volatile than Invesco MSCI Global. It trades about 0.03 of its potential returns per unit of risk. Invesco MSCI Global is currently generating about 0.02 per unit of risk. If you would invest  7,632  in Materials Select Sector on September 25, 2024 and sell it today you would earn a total of  875.00  from holding Materials Select Sector or generate 11.46% return on investment over 90 days.

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

Materials Select Sector  vs.  Invesco MSCI Global

Materials Select Sector

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Materials Select Sector has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Etf's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Invesco MSCI Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco MSCI Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with Materials Select and Invesco MSCI

The main advantage of trading using opposite Materials Select and Invesco MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Materials Select 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 Materials Select Sector and Invesco MSCI 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.