Correlation Between IShares Trust and Invesco DB

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

Diversification Opportunities for IShares Trust and Invesco DB

0.39

Correlation Coefficient

IShares Trust  Invesco DB

Weak diversification

The 3 months correlation between IShares and Invesco is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Invesco DB Multi Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DB Multi 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 DB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DB Multi has no effect on the direction of IShares Trust i.e., IShares Trust and Invesco DB go up and down completely randomly.

Pair Corralation between IShares Trust and Invesco DB

If you would invest  28,751  in Invesco DB Multi Sector on December 2, 2024 and sell it today you would earn a total of  0.00  from holding Invesco DB Multi Sector or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

iShares Trust   vs.  Invesco DB Multi Sector

iShares Trust

Risk-Adjusted Performance

Very Weak

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

Invesco DB Multi

Risk-Adjusted Performance

Very Weak

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

Pair Trading with IShares Trust and Invesco DB

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

The idea behind iShares Trust and Invesco DB Multi Sector 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.