Correlation Between IShares Global and Invesco Solar

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

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

Diversification Opportunities for IShares Global and Invesco Solar

0.06

Correlation Coefficient

IShares Global  Invesco Solar

Significant diversification

The 3 months correlation between IShares and Invesco is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Clean and Invesco Solar ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Solar ETF and IShares Global 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 Global Clean are associated (or correlated) with Invesco Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Solar ETF has no effect on the direction of IShares Global i.e., IShares Global and Invesco Solar go up and down completely randomly.

Pair Corralation between IShares Global and Invesco Solar

Given the investment horizon of 90 days iShares Global Clean is expected to generate 0.6 times more return on investment than Invesco Solar. However, iShares Global Clean is 1.67 times less risky than Invesco Solar. It trades about 0.02 of its potential returns per unit of risk. Invesco Solar ETF is currently generating about -0.06 per unit of risk. If you would invest  1,143  in iShares Global Clean on December 29, 2024 and sell it today you would earn a total of  10.00  from holding iShares Global Clean or generate 0.87% return on investment over 90 days.

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

iShares Global Clean  vs.  Invesco Solar ETF

iShares Global Clean

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Clean are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, IShares Global is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Invesco Solar ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Solar ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with IShares Global and Invesco Solar

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

The idea behind iShares Global Clean and Invesco Solar ETF 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.