Correlation Between IShares AsiaPacific and Invesco International

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

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

Diversification Opportunities for IShares AsiaPacific and Invesco International

0.81

Correlation Coefficient

IShares AsiaPacific  Invesco International

Very poor diversification

The 3 months correlation between IShares and Invesco is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding iShares AsiaPacific Dividend and Invesco International Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco International and IShares AsiaPacific 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 AsiaPacific Dividend are associated (or correlated) with Invesco International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco International has no effect on the direction of IShares AsiaPacific i.e., IShares AsiaPacific and Invesco International go up and down completely randomly.

Pair Corralation between IShares AsiaPacific and Invesco International

Given the investment horizon of 90 days iShares AsiaPacific Dividend is expected to under-perform the Invesco International. In addition to that, IShares AsiaPacific is 1.02 times more volatile than Invesco International Dividend. It trades about -0.23 of its total potential returns per unit of risk. Invesco International Dividend is currently generating about -0.19 per unit of volatility. If you would invest  1,900  in Invesco International Dividend on September 21, 2024 and sell it today you would lose (65.00) from holding Invesco International Dividend or give up 3.42% of portfolio value over 90 days.

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

iShares AsiaPacific Dividend  vs.  Invesco International Dividend

iShares AsiaPacific

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares AsiaPacific Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares AsiaPacific is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco International Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with IShares AsiaPacific and Invesco International

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

The idea behind iShares AsiaPacific Dividend and Invesco International Dividend 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.