Correlation Between Invesco Dynamic and IShares Consumer

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

Diversification Opportunities for Invesco Dynamic and IShares Consumer

0.41

Correlation Coefficient

Invesco Dynamic  IShares Consumer

Very weak diversification

The 3 months correlation between Invesco and IShares is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Dynamic Food and iShares Consumer Staples in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Consumer Staples 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 Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Consumer Staples has no effect on the direction of Invesco Dynamic i.e., Invesco Dynamic and IShares Consumer go up and down completely randomly.

Pair Corralation between Invesco Dynamic and IShares Consumer

Considering the 90-day investment horizon Invesco Dynamic is expected to generate 1.66 times less return on investment than IShares Consumer. In addition to that, Invesco Dynamic is 1.1 times more volatile than iShares Consumer Staples. It trades about 0.02 of its total potential returns per unit of risk. iShares Consumer Staples is currently generating about 0.04 per unit of volatility. If you would invest  6,239  in iShares Consumer Staples on September 20, 2024 and sell it today you would earn a total of  363.00  from holding iShares Consumer Staples or generate 5.82% 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 Consumer Staples

Invesco Dynamic Food

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Dynamic Food has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Consumer Staples

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Consumer Staples has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, IShares Consumer is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Invesco Dynamic and IShares Consumer

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

The idea behind Invesco Dynamic Food and iShares Consumer Staples 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.