Correlation Between Invesco Water and IShares Global

Can any of the company-specific risk be diversified away by investing in both Invesco Water 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 Water 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 Water Resources and iShares Global Timber, you can compare the effects of market volatilities on Invesco Water 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 Water with a short position of IShares Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Water and IShares Global.

Diversification Opportunities for Invesco Water and IShares Global

0.67

Correlation Coefficient

Invesco Water  IShares Global

Poor diversification

The 3 months correlation between Invesco and IShares is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Water Resources and iShares Global Timber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Timber and Invesco Water 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 Water Resources 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 Timber has no effect on the direction of Invesco Water i.e., Invesco Water and IShares Global go up and down completely randomly.

Pair Corralation between Invesco Water and IShares Global

Considering the 90-day investment horizon Invesco Water Resources is expected to generate 0.94 times more return on investment than IShares Global. However, Invesco Water Resources is 1.07 times less risky than IShares Global. It trades about -0.02 of its potential returns per unit of risk. iShares Global Timber is currently generating about -0.03 per unit of risk. If you would invest  6,699  in Invesco Water Resources on October 10, 2024 and sell it today you would lose (186.00) from holding Invesco Water Resources or give up 2.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.2%
Values	Daily Returns

Invesco Water Resources  vs.  iShares Global Timber

Invesco Water Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Water Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's technical indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

iShares Global Timber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Global Timber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with Invesco Water and IShares Global

The main advantage of trading using opposite Invesco Water and IShares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Water 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 Water Resources and iShares Global Timber 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.