Correlation Between IShares Medical and Invesco SP

Can any of the company-specific risk be diversified away by investing in both IShares Medical and Invesco SP 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 SP 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 SP SmallCap, you can compare the effects of market volatilities on IShares Medical and Invesco SP 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 SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Medical and Invesco SP.

Diversification Opportunities for IShares Medical and Invesco SP

0.71

Correlation Coefficient

IShares Medical  Invesco SP

Poor diversification

The 3 months correlation between IShares and Invesco is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding iShares Medical Devices and Invesco SP SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP SmallCap 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 SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP SmallCap has no effect on the direction of IShares Medical i.e., IShares Medical and Invesco SP go up and down completely randomly.

Pair Corralation between IShares Medical and Invesco SP

Considering the 90-day investment horizon iShares Medical Devices is not expected to generate positive returns. However, iShares Medical Devices is 1.88 times less risky than Invesco SP. It waists most of its returns potential to compensate for thr risk taken. Invesco SP is generating about 0.0 per unit of risk. If you would invest  4,650  in Invesco SP SmallCap on September 15, 2024 and sell it today you would lose (21.00) from holding Invesco SP SmallCap or give up 0.45% of portfolio value over 90 days.

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

iShares Medical Devices  vs.  Invesco SP SmallCap

iShares Medical Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Medical Devices has generated negative risk-adjusted returns adding no value to investors with long positions. 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 SP SmallCap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco SP SmallCap has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Invesco SP is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with IShares Medical and Invesco SP

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

The idea behind iShares Medical Devices and Invesco SP SmallCap 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.