Correlation Between IShares Core and Invesco Agriculture

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

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

Diversification Opportunities for IShares Core and Invesco Agriculture

0.68

Correlation Coefficient

IShares Core  Invesco Agriculture

Poor diversification

The 3 months correlation between IShares and Invesco is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and Invesco Agriculture Commodity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Agriculture and IShares Core 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 Core SP are associated (or correlated) with Invesco Agriculture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Agriculture has no effect on the direction of IShares Core i.e., IShares Core and Invesco Agriculture go up and down completely randomly.

Pair Corralation between IShares Core and Invesco Agriculture

Considering the 90-day investment horizon IShares Core is expected to generate 3.6 times less return on investment than Invesco Agriculture. In addition to that, IShares Core is 1.0 times more volatile than Invesco Agriculture Commodity. It trades about 0.05 of its total potential returns per unit of risk. Invesco Agriculture Commodity is currently generating about 0.19 per unit of volatility. If you would invest  3,240  in Invesco Agriculture Commodity on October 4, 2024 and sell it today you would earn a total of  301.00  from holding Invesco Agriculture Commodity or generate 9.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

iShares Core SP  vs.  Invesco Agriculture Commodity

iShares Core SP

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares Core is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Invesco Agriculture

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Agriculture Commodity are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, Invesco Agriculture may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with IShares Core and Invesco Agriculture

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

The idea behind iShares Core SP and Invesco Agriculture Commodity 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.