Correlation Between IShares JP and Invesco Emerging

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

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

Diversification Opportunities for IShares JP and Invesco Emerging

0.78

Correlation Coefficient

IShares JP  Invesco Emerging

Poor diversification

The 3 months correlation between IShares and Invesco is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding iShares JP Morgan and Invesco Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Emerging Markets and IShares JP 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 JP Morgan are associated (or correlated) with Invesco Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Emerging Markets has no effect on the direction of IShares JP i.e., IShares JP and Invesco Emerging go up and down completely randomly.

Pair Corralation between IShares JP and Invesco Emerging

Given the investment horizon of 90 days iShares JP Morgan is expected to under-perform the Invesco Emerging. But the etf apears to be less risky and, when comparing its historical volatility, iShares JP Morgan is 1.92 times less risky than Invesco Emerging. The etf trades about -0.1 of its potential returns per unit of risk. The Invesco Emerging Markets is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,013  in Invesco Emerging Markets on October 20, 2024 and sell it today you would lose (9.00) from holding Invesco Emerging Markets or give up 0.45% of portfolio value over 90 days.

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

iShares JP Morgan  vs.  Invesco Emerging Markets

iShares JP Morgan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares JP Morgan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, IShares JP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Invesco Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Emerging Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Invesco Emerging 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 JP and Invesco Emerging

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

The idea behind iShares JP Morgan and Invesco Emerging Markets 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.