Correlation Between Invesco BulletShares and FlexShares Core

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

By analyzing existing cross correlation between Invesco BulletShares 2024 and FlexShares Core Select, you can compare the effects of market volatilities on Invesco BulletShares and FlexShares Core 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 BulletShares with a short position of FlexShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco BulletShares and FlexShares Core.

Diversification Opportunities for Invesco BulletShares and FlexShares Core

-0.77

Correlation Coefficient

Invesco BulletShares  FlexShares Core

Pay attention - limited upside

The 3 months correlation between Invesco and FlexShares is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Invesco BulletShares 2024 and FlexShares Core Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Core Select and Invesco BulletShares 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 BulletShares 2024 are associated (or correlated) with FlexShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Core Select has no effect on the direction of Invesco BulletShares i.e., Invesco BulletShares and FlexShares Core go up and down completely randomly.

Pair Corralation between Invesco BulletShares and FlexShares Core

Given the investment horizon of 90 days Invesco BulletShares 2024 is expected to generate 0.46 times more return on investment than FlexShares Core. However, Invesco BulletShares 2024 is 2.17 times less risky than FlexShares Core. It trades about 0.14 of its potential returns per unit of risk. FlexShares Core Select is currently generating about 0.03 per unit of risk. If you would invest  1,986  in Invesco BulletShares 2024 on September 5, 2024 and sell it today you would earn a total of  279.00  from holding Invesco BulletShares 2024 or generate 14.05% return on investment over 90 days.

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

Invesco BulletShares 2024  vs.  FlexShares Core Select

Invesco BulletShares 2024

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco BulletShares 2024 are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward-looking indicators, Invesco BulletShares is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

FlexShares Core Select

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FlexShares Core Select has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, FlexShares Core is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Invesco BulletShares and FlexShares Core

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

The idea behind Invesco BulletShares 2024 and FlexShares Core Select 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.