Correlation Between Invesco Fundamental and IShares JP

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

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

Diversification Opportunities for Invesco Fundamental and IShares JP

0.89

Correlation Coefficient

Invesco Fundamental  IShares JP

Very poor diversification

The 3 months correlation between Invesco and IShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Fundamental High and iShares JP Morgan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares JP Morgan and Invesco Fundamental 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 Fundamental High are associated (or correlated) with IShares JP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares JP Morgan has no effect on the direction of Invesco Fundamental i.e., Invesco Fundamental and IShares JP go up and down completely randomly.

Pair Corralation between Invesco Fundamental and IShares JP

Considering the 90-day investment horizon Invesco Fundamental is expected to generate 2.21 times less return on investment than IShares JP. But when comparing it to its historical volatility, Invesco Fundamental High is 1.54 times less risky than IShares JP. It trades about 0.08 of its potential returns per unit of risk. iShares JP Morgan is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,616  in iShares JP Morgan on October 21, 2024 and sell it today you would earn a total of  220.00  from holding iShares JP Morgan or generate 6.08% return on investment over 90 days.

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

Invesco Fundamental High  vs.  iShares JP Morgan

Invesco Fundamental High

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Fundamental High are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, Invesco Fundamental is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

iShares JP Morgan

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares JP Morgan are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, IShares JP is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invesco Fundamental and IShares JP

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

The idea behind Invesco Fundamental High and iShares JP Morgan 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.