Correlation Between IShares Trust and Invesco SP

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

Diversification Opportunities for IShares Trust and Invesco SP

0.44

Correlation Coefficient

IShares Trust  Invesco SP

Very weak diversification

The 3 months correlation between IShares and Invesco is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Invesco SP Spin Off in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP Spin and IShares Trust 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 Trust 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 Spin has no effect on the direction of IShares Trust i.e., IShares Trust and Invesco SP go up and down completely randomly.

Pair Corralation between IShares Trust and Invesco SP

Given the investment horizon of 90 days iShares Trust is expected to generate 0.42 times more return on investment than Invesco SP. However, iShares Trust is 2.36 times less risky than Invesco SP. It trades about 0.02 of its potential returns per unit of risk. Invesco SP Spin Off is currently generating about -0.09 per unit of risk. If you would invest  3,052  in iShares Trust on December 28, 2024 and sell it today you would earn a total of  23.00  from holding iShares Trust or generate 0.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

iShares Trust  vs.  Invesco SP Spin Off

iShares Trust

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, IShares Trust is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Invesco SP Spin

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco SP Spin Off has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with IShares Trust and Invesco SP

The main advantage of trading using opposite IShares Trust and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Trust 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 Trust and Invesco SP Spin Off 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.