Correlation Between IShares Medical and Invesco Aerospace

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

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

Diversification Opportunities for IShares Medical and Invesco Aerospace

0.43

Correlation Coefficient

IShares Medical  Invesco Aerospace

Very weak diversification

The 3 months correlation between IShares and Invesco is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding iShares Medical Devices and Invesco Aerospace Defense in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Aerospace Defense and IShares Medical 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 Medical Devices are associated (or correlated) with Invesco Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Aerospace Defense has no effect on the direction of IShares Medical i.e., IShares Medical and Invesco Aerospace go up and down completely randomly.

Pair Corralation between IShares Medical and Invesco Aerospace

Considering the 90-day investment horizon iShares Medical Devices is expected to generate 0.88 times more return on investment than Invesco Aerospace. However, iShares Medical Devices is 1.13 times less risky than Invesco Aerospace. It trades about 0.03 of its potential returns per unit of risk. Invesco Aerospace Defense is currently generating about 0.03 per unit of risk. If you would invest  5,840  in iShares Medical Devices on December 29, 2024 and sell it today you would earn a total of  102.00  from holding iShares Medical Devices or generate 1.75% return on investment over 90 days.

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

iShares Medical Devices  vs.  Invesco Aerospace Defense

iShares Medical Devices

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Medical Devices are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, IShares Medical is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Invesco Aerospace Defense

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Aerospace Defense are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Invesco Aerospace is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Medical and Invesco Aerospace

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

The idea behind iShares Medical Devices and Invesco Aerospace Defense 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.