Correlation Between Invesco China and Xtrackers MSCI

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

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

Diversification Opportunities for Invesco China and Xtrackers MSCI

-0.1

Correlation Coefficient

Invesco China  Xtrackers MSCI

Good diversification

The 3 months correlation between Invesco and Xtrackers is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Invesco China Technology and Xtrackers MSCI All in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers MSCI All and Invesco China 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 China Technology are associated (or correlated) with Xtrackers MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers MSCI All has no effect on the direction of Invesco China i.e., Invesco China and Xtrackers MSCI go up and down completely randomly.

Pair Corralation between Invesco China and Xtrackers MSCI

Given the investment horizon of 90 days Invesco China Technology is expected to generate 0.03 times more return on investment than Xtrackers MSCI. However, Invesco China Technology is 38.88 times less risky than Xtrackers MSCI. It trades about -0.32 of its potential returns per unit of risk. Xtrackers MSCI All is currently generating about -0.5 per unit of risk. If you would invest  3,389  in Invesco China Technology on January 20, 2024 and sell it today you would lose (295.00) from holding Invesco China Technology or give up 8.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	18.18%
Values	Daily Returns

Invesco China Technology  vs.  Xtrackers MSCI All

Invesco China Technology

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco China Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Invesco China is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Xtrackers MSCI All

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Xtrackers MSCI All has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very fragile basic indicators, Xtrackers MSCI displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invesco China and Xtrackers MSCI

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

The idea behind Invesco China Technology and Xtrackers MSCI All 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 Commodity Directory module to find actively traded commodities issued by global exchanges.