Correlation Between IShares Global and Invesco SP

Can any of the company-specific risk be diversified away by investing in both IShares Global 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 Global 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 Global Consumer and Invesco SP 500, you can compare the effects of market volatilities on IShares Global 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 Global with a short position of Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Global and Invesco SP.

Diversification Opportunities for IShares Global and Invesco SP

0.21

Correlation Coefficient

IShares Global  Invesco SP

Modest diversification

The 3 months correlation between IShares and Invesco is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Consumer and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 500 and IShares Global 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 Global Consumer 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 500 has no effect on the direction of IShares Global i.e., IShares Global and Invesco SP go up and down completely randomly.

Pair Corralation between IShares Global and Invesco SP

Considering the 90-day investment horizon iShares Global Consumer is expected to generate 0.04 times more return on investment than Invesco SP. However, iShares Global Consumer is 22.38 times less risky than Invesco SP. It trades about -0.3 of its potential returns per unit of risk. Invesco SP 500 is currently generating about -0.24 per unit of risk. If you would invest  6,242  in iShares Global Consumer on September 25, 2024 and sell it today you would lose (196.00) from holding iShares Global Consumer or give up 3.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

iShares Global Consumer  vs.  Invesco SP 500

iShares Global Consumer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Global Consumer has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, IShares Global is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Invesco SP 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Etf's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Pair Trading with IShares Global and Invesco SP

The main advantage of trading using opposite IShares Global and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Global 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 Global Consumer and Invesco SP 500 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.