Correlation Between IShares 1 and Invesco Investment

Can any of the company-specific risk be diversified away by investing in both IShares 1 and Invesco Investment 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 1 and Invesco Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares 1 5 Year and Invesco Investment Grade, you can compare the effects of market volatilities on IShares 1 and Invesco Investment 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 1 with a short position of Invesco Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 1 and Invesco Investment.

Diversification Opportunities for IShares 1 and Invesco Investment

0.99

Correlation Coefficient

IShares 1  Invesco Investment

No risk reduction

The 3 months correlation between IShares and Invesco is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares 1 5 Year and Invesco Investment Grade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Investment Grade and IShares 1 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 1 5 Year are associated (or correlated) with Invesco Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Investment Grade has no effect on the direction of IShares 1 i.e., IShares 1 and Invesco Investment go up and down completely randomly.

Pair Corralation between IShares 1 and Invesco Investment

Given the investment horizon of 90 days IShares 1 is expected to generate 1.23 times less return on investment than Invesco Investment. But when comparing it to its historical volatility, iShares 1 5 Year is 1.43 times less risky than Invesco Investment. It trades about 0.27 of its potential returns per unit of risk. Invesco Investment Grade is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  2,395  in Invesco Investment Grade on December 19, 2024 and sell it today you would earn a total of  55.00  from holding Invesco Investment Grade or generate 2.3% return on investment over 90 days.

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

iShares 1 5 Year  vs.  Invesco Investment Grade

iShares 1 5

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares 1 5 Year are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares 1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco Investment Grade

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Investment Grade are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Invesco Investment is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares 1 and Invesco Investment

The main advantage of trading using opposite IShares 1 and Invesco Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 1 position performs unexpectedly, Invesco Investment 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 Investment will offset losses from the drop in Invesco Investment's long position.

The idea behind iShares 1 5 Year and Invesco Investment Grade 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.