Correlation Between IShares India and Invesco India

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

By analyzing existing cross correlation between iShares India 50 and Invesco India ETF, you can compare the effects of market volatilities on IShares India and Invesco India 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 India with a short position of Invesco India. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares India and Invesco India.

Diversification Opportunities for IShares India and Invesco India

0.98

Correlation Coefficient

IShares India  Invesco India

Almost no diversification

The 3 months correlation between IShares and Invesco is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares India 50 and Invesco India ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco India ETF and IShares India 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 India 50 are associated (or correlated) with Invesco India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco India ETF has no effect on the direction of IShares India i.e., IShares India and Invesco India go up and down completely randomly.

Pair Corralation between IShares India and Invesco India

Given the investment horizon of 90 days iShares India 50 is expected to generate 0.8 times more return on investment than Invesco India. However, iShares India 50 is 1.24 times less risky than Invesco India. It trades about 0.0 of its potential returns per unit of risk. Invesco India ETF is currently generating about -0.04 per unit of risk. If you would invest  5,143  in iShares India 50 on December 26, 2024 and sell it today you would lose (11.00) from holding iShares India 50 or give up 0.21% of portfolio value over 90 days.

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

iShares India 50  vs.  Invesco India ETF

iShares India 50

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares India 50 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, IShares India is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco India ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco India ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Invesco India is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares India and Invesco India

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

The idea behind iShares India 50 and Invesco India 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.