Correlation Between IShares Trust and Invesco QQQ

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

Diversification Opportunities for IShares Trust and Invesco QQQ

0.62

Correlation Coefficient

IShares Trust  Invesco QQQ

Poor diversification

The 3 months correlation between IShares and Invesco is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Invesco QQQ Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco QQQ Trust 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 QQQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco QQQ Trust has no effect on the direction of IShares Trust i.e., IShares Trust and Invesco QQQ go up and down completely randomly.

Pair Corralation between IShares Trust and Invesco QQQ

Assuming the 90 days trading horizon iShares Trust is expected to generate 1.02 times more return on investment than Invesco QQQ. However, IShares Trust is 1.02 times more volatile than Invesco QQQ Trust. It trades about 0.02 of its potential returns per unit of risk. Invesco QQQ Trust is currently generating about -0.13 per unit of risk. If you would invest  227,845  in iShares Trust on December 30, 2024 and sell it today you would earn a total of  2,455  from holding iShares Trust or generate 1.08% return on investment over 90 days.

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

iShares Trust   vs.  Invesco QQQ Trust

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 fairly strong technical and fundamental 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 QQQ Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco QQQ Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with IShares Trust and Invesco QQQ

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

The idea behind iShares Trust and Invesco QQQ Trust 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..