Correlation Between IShares Cohen and Invesco KBW

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

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

Diversification Opportunities for IShares Cohen and Invesco KBW

0.73

Correlation Coefficient

IShares Cohen  Invesco KBW

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 Cohen Steers and Invesco KBW Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco KBW Premium and IShares Cohen 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 Cohen Steers are associated (or correlated) with Invesco KBW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco KBW Premium has no effect on the direction of IShares Cohen i.e., IShares Cohen and Invesco KBW go up and down completely randomly.

Pair Corralation between IShares Cohen and Invesco KBW

Considering the 90-day investment horizon iShares Cohen Steers is expected to generate 1.12 times more return on investment than Invesco KBW. However, IShares Cohen is 1.12 times more volatile than Invesco KBW Premium. It trades about -0.1 of its potential returns per unit of risk. Invesco KBW Premium is currently generating about -0.17 per unit of risk. If you would invest  6,674  in iShares Cohen Steers on September 16, 2024 and sell it today you would lose (366.00) from holding iShares Cohen Steers or give up 5.48% of portfolio value over 90 days.

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

iShares Cohen Steers  vs.  Invesco KBW Premium

iShares Cohen Steers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Cohen Steers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, IShares Cohen is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Invesco KBW Premium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco KBW Premium 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 strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with IShares Cohen and Invesco KBW

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

The idea behind iShares Cohen Steers and Invesco KBW Premium 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.