Correlation Between Invesco Optimum and IShares SP

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

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

Diversification Opportunities for Invesco Optimum and IShares SP

0.99

Correlation Coefficient

Invesco Optimum  IShares SP

No risk reduction

The 3 months correlation between Invesco and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Optimum Yield and iShares SP GSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP GSCI and Invesco Optimum 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 Optimum Yield are associated (or correlated) with IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP GSCI has no effect on the direction of Invesco Optimum i.e., Invesco Optimum and IShares SP go up and down completely randomly.

Pair Corralation between Invesco Optimum and IShares SP

Given the investment horizon of 90 days Invesco Optimum is expected to generate 1.14 times less return on investment than IShares SP. But when comparing it to its historical volatility, Invesco Optimum Yield is 1.09 times less risky than IShares SP. It trades about 0.04 of its potential returns per unit of risk. iShares SP GSCI is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,057  in iShares SP GSCI on September 1, 2024 and sell it today you would earn a total of  57.00  from holding iShares SP GSCI or generate 2.77% return on investment over 90 days.

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

Invesco Optimum Yield  vs.  iShares SP GSCI

Invesco Optimum Yield

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Optimum Yield are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Invesco Optimum is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares SP GSCI

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP GSCI are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares SP is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Invesco Optimum and IShares SP

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

The idea behind Invesco Optimum Yield and iShares SP GSCI 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.