Correlation Between Invesco Dynamic and IShares Industrials

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

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

Diversification Opportunities for Invesco Dynamic and IShares Industrials

0.58

Correlation Coefficient

Invesco Dynamic  IShares Industrials

Very weak diversification

The 3 months correlation between Invesco and IShares is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Dynamic Food and iShares Industrials ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Industrials ETF and Invesco Dynamic 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 Dynamic Food are associated (or correlated) with IShares Industrials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Industrials ETF has no effect on the direction of Invesco Dynamic i.e., Invesco Dynamic and IShares Industrials go up and down completely randomly.

Pair Corralation between Invesco Dynamic and IShares Industrials

Considering the 90-day investment horizon Invesco Dynamic is expected to generate 2.71 times less return on investment than IShares Industrials. But when comparing it to its historical volatility, Invesco Dynamic Food is 1.31 times less risky than IShares Industrials. It trades about 0.06 of its potential returns per unit of risk. iShares Industrials ETF is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  13,044  in iShares Industrials ETF on September 14, 2024 and sell it today you would earn a total of  886.00  from holding iShares Industrials ETF or generate 6.79% return on investment over 90 days.

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

Invesco Dynamic Food  vs.  iShares Industrials ETF

Invesco Dynamic Food

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Dynamic Food are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady fundamental drivers, Invesco Dynamic is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

iShares Industrials ETF

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Industrials ETF are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, IShares Industrials may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Invesco Dynamic and IShares Industrials

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

The idea behind Invesco Dynamic Food and iShares Industrials ETF 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.