Correlation Between Invesco KBW and IShares Preferred

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

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

Diversification Opportunities for Invesco KBW and IShares Preferred

-0.25

Correlation Coefficient

Invesco KBW  IShares Preferred

Very good diversification

The 3 months correlation between Invesco and IShares is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Invesco KBW High and iShares Preferred and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Preferred and Invesco KBW 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 Invesco KBW High are associated (or correlated) with IShares Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Preferred has no effect on the direction of Invesco KBW i.e., Invesco KBW and IShares Preferred go up and down completely randomly.

Pair Corralation between Invesco KBW and IShares Preferred

Given the investment horizon of 90 days Invesco KBW High is expected to generate 1.79 times more return on investment than IShares Preferred. However, Invesco KBW is 1.79 times more volatile than iShares Preferred and. It trades about 0.04 of its potential returns per unit of risk. iShares Preferred and is currently generating about -0.06 per unit of risk. If you would invest  1,504  in Invesco KBW High on September 16, 2024 and sell it today you would earn a total of  30.00  from holding Invesco KBW High or generate 1.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Invesco KBW High  vs.  iShares Preferred and

Invesco KBW High

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco KBW High are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Invesco KBW is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares Preferred

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Preferred and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, IShares Preferred is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Invesco KBW and IShares Preferred

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

The idea behind Invesco KBW High and iShares Preferred and 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.

Check out your portfolio center.

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.