Correlation Between IShares Continental and Invesco Pan

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

By analyzing existing cross correlation between iShares Continental European and Invesco Pan European, you can compare the effects of market volatilities on IShares Continental and Invesco Pan 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 IShares Continental with a short position of Invesco Pan. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Continental and Invesco Pan.

Diversification Opportunities for IShares Continental and Invesco Pan

0.84

Correlation Coefficient

IShares Continental  Invesco Pan

Very poor diversification

The 3 months correlation between IShares and Invesco is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding iShares Continental European and Invesco Pan European in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Pan European and IShares Continental 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 iShares Continental European are associated (or correlated) with Invesco Pan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Pan European has no effect on the direction of IShares Continental i.e., IShares Continental and Invesco Pan go up and down completely randomly.

Pair Corralation between IShares Continental and Invesco Pan

Assuming the 90 days trading horizon iShares Continental European is expected to generate 3.12 times more return on investment than Invesco Pan. However, IShares Continental is 3.12 times more volatile than Invesco Pan European. It trades about 0.17 of its potential returns per unit of risk. Invesco Pan European is currently generating about 0.12 per unit of risk. If you would invest  109.00  in iShares Continental European on December 28, 2024 and sell it today you would earn a total of  11.00  from holding iShares Continental European or generate 10.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

iShares Continental European  vs.  Invesco Pan European

iShares Continental

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Continental European are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of very unsteady basic indicators, IShares Continental may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Invesco Pan European

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Pan European are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of comparatively stable basic indicators, Invesco Pan is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares Continental and Invesco Pan

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

The idea behind iShares Continental European and Invesco Pan European 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 Global Correlations module to find global opportunities by holding instruments from different markets.