Correlation Between IShares VII and Invesco AT1

Can any of the company-specific risk be diversified away by investing in both IShares VII and Invesco AT1 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 VII and Invesco AT1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares VII PLC and Invesco AT1 Capital, you can compare the effects of market volatilities on IShares VII and Invesco AT1 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 VII with a short position of Invesco AT1. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares VII and Invesco AT1.

Diversification Opportunities for IShares VII and Invesco AT1

0.46

Correlation Coefficient

IShares VII  Invesco AT1

Very weak diversification

The 3 months correlation between IShares and Invesco is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding iShares VII PLC and Invesco AT1 Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco AT1 Capital and IShares VII 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 VII PLC are associated (or correlated) with Invesco AT1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco AT1 Capital has no effect on the direction of IShares VII i.e., IShares VII and Invesco AT1 go up and down completely randomly.

Pair Corralation between IShares VII and Invesco AT1

Assuming the 90 days trading horizon iShares VII PLC is expected to generate 3.68 times more return on investment than Invesco AT1. However, IShares VII is 3.68 times more volatile than Invesco AT1 Capital. It trades about 0.14 of its potential returns per unit of risk. Invesco AT1 Capital is currently generating about 0.2 per unit of risk. If you would invest  3,856,500  in iShares VII PLC on September 29, 2024 and sell it today you would earn a total of  61,500  from holding iShares VII PLC or generate 1.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

iShares VII PLC  vs.  Invesco AT1 Capital

iShares VII PLC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares VII PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares VII is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Invesco AT1 Capital

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco AT1 Capital are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Invesco AT1 is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares VII and Invesco AT1

The main advantage of trading using opposite IShares VII and Invesco AT1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares VII position performs unexpectedly, Invesco AT1 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 AT1 will offset losses from the drop in Invesco AT1's long position.

The idea behind iShares VII PLC and Invesco AT1 Capital 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.