Correlation Between Invesco Financial and IShares Global

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

By analyzing existing cross correlation between Invesco Financial Preferred and iShares Global 100, you can compare the effects of market volatilities on Invesco Financial and IShares Global 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 Financial with a short position of IShares Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Financial and IShares Global.

Diversification Opportunities for Invesco Financial and IShares Global

-0.53

Correlation Coefficient

Invesco Financial  IShares Global

Excellent diversification

The 3 months correlation between Invesco and IShares is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Financial Preferred and iShares Global 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global 100 and Invesco Financial 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 Financial Preferred are associated (or correlated) with IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global 100 has no effect on the direction of Invesco Financial i.e., Invesco Financial and IShares Global go up and down completely randomly.

Pair Corralation between Invesco Financial and IShares Global

Considering the 90-day investment horizon Invesco Financial is expected to generate 6.09 times less return on investment than IShares Global. But when comparing it to its historical volatility, Invesco Financial Preferred is 1.05 times less risky than IShares Global. It trades about 0.02 of its potential returns per unit of risk. iShares Global 100 is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  6,441  in iShares Global 100 on October 9, 2024 and sell it today you would earn a total of  3,824  from holding iShares Global 100 or generate 59.37% return on investment over 90 days.

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

Invesco Financial Preferred  vs.  iShares Global 100

Invesco Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Financial Preferred has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Invesco Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

iShares Global 100

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global 100 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Global is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Invesco Financial and IShares Global

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

The idea behind Invesco Financial Preferred and iShares Global 100 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.