Correlation Between IShares Select and Invesco FTSE

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

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

Diversification Opportunities for IShares Select and Invesco FTSE

0.96

Correlation Coefficient

IShares Select  Invesco FTSE

Almost no diversification

The 3 months correlation between IShares and Invesco is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding iShares Select Dividend and Invesco FTSE RAFI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco FTSE RAFI and IShares Select 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 Select Dividend are associated (or correlated) with Invesco FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco FTSE RAFI has no effect on the direction of IShares Select i.e., IShares Select and Invesco FTSE go up and down completely randomly.

Pair Corralation between IShares Select and Invesco FTSE

Considering the 90-day investment horizon iShares Select Dividend is expected to generate 1.0 times more return on investment than Invesco FTSE. However, IShares Select is 1.0 times more volatile than Invesco FTSE RAFI. It trades about 0.17 of its potential returns per unit of risk. Invesco FTSE RAFI is currently generating about 0.15 per unit of risk. If you would invest  13,254  in iShares Select Dividend on August 30, 2024 and sell it today you would earn a total of  1,064  from holding iShares Select Dividend or generate 8.03% return on investment over 90 days.

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

iShares Select Dividend  vs.  Invesco FTSE RAFI

iShares Select Dividend

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Select Dividend are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, IShares Select may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Invesco FTSE RAFI

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco FTSE RAFI are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Invesco FTSE may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with IShares Select and Invesco FTSE

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

The idea behind iShares Select Dividend and Invesco FTSE RAFI 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.