Correlation Between IShares Core and Invesco Treasury

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

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

Diversification Opportunities for IShares Core and Invesco Treasury

0.73

Correlation Coefficient

IShares Core  Invesco Treasury

Poor diversification

The 3 months correlation between IShares and Invesco is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and Invesco Treasury Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Treasury Bond and IShares Core 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 Core MSCI are associated (or correlated) with Invesco Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Treasury Bond has no effect on the direction of IShares Core i.e., IShares Core and Invesco Treasury go up and down completely randomly.

Pair Corralation between IShares Core and Invesco Treasury

Assuming the 90 days trading horizon iShares Core MSCI is expected to generate 1.74 times more return on investment than Invesco Treasury. However, IShares Core is 1.74 times more volatile than Invesco Treasury Bond. It trades about 0.01 of its potential returns per unit of risk. Invesco Treasury Bond is currently generating about -0.17 per unit of risk. If you would invest  3,435  in iShares Core MSCI on September 29, 2024 and sell it today you would earn a total of  2.00  from holding iShares Core MSCI or generate 0.06% return on investment over 90 days.

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

iShares Core MSCI  vs.  Invesco Treasury Bond

iShares Core MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Invesco Treasury Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Treasury Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Invesco Treasury 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 Core and Invesco Treasury

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

The idea behind iShares Core MSCI and Invesco Treasury Bond 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.