Correlation Between IShares California and Invesco New

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

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

Diversification Opportunities for IShares California and Invesco New

0.93

Correlation Coefficient

IShares California  Invesco New

Almost no diversification

The 3 months correlation between IShares and Invesco is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding iShares California Muni and Invesco New York in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco New York and IShares California 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 California Muni are associated (or correlated) with Invesco New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco New York has no effect on the direction of IShares California i.e., IShares California and Invesco New go up and down completely randomly.

Pair Corralation between IShares California and Invesco New

Considering the 90-day investment horizon iShares California Muni is expected to generate 0.84 times more return on investment than Invesco New. However, iShares California Muni is 1.18 times less risky than Invesco New. It trades about 0.05 of its potential returns per unit of risk. Invesco New York is currently generating about 0.04 per unit of risk. If you would invest  5,752  in iShares California Muni on September 12, 2024 and sell it today you would earn a total of  46.00  from holding iShares California Muni or generate 0.8% return on investment over 90 days.

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

iShares California Muni  vs.  Invesco New York

iShares California Muni

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares California Muni are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, IShares California is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Invesco New York

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco New York are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Invesco New is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares California and Invesco New

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

The idea behind iShares California Muni and Invesco New York 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.