Correlation Between IShares New and Invesco California

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

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

Diversification Opportunities for IShares New and Invesco California

0.85

Correlation Coefficient

IShares New  Invesco California

Very poor diversification

The 3 months correlation between IShares and Invesco is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding iShares New York and Invesco California AMT Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco California AMT and IShares New 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 New York are associated (or correlated) with Invesco California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco California AMT has no effect on the direction of IShares New i.e., IShares New and Invesco California go up and down completely randomly.

Pair Corralation between IShares New and Invesco California

Considering the 90-day investment horizon IShares New is expected to generate 1.71 times less return on investment than Invesco California. But when comparing it to its historical volatility, iShares New York is 1.66 times less risky than Invesco California. It trades about 0.05 of its potential returns per unit of risk. Invesco California AMT Free is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,480  in Invesco California AMT Free on September 13, 2024 and sell it today you would earn a total of  25.00  from holding Invesco California AMT Free or generate 1.01% return on investment over 90 days.

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

iShares New York  vs.  Invesco California AMT Free

iShares New York

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares New York are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares New is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Invesco California AMT

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Invesco California AMT Free has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Invesco California is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares New and Invesco California

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

The idea behind iShares New York and Invesco California AMT Free 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.