Correlation Between Invesco 1 and IShares ESG

Can any of the company-specific risk be diversified away by investing in both Invesco 1 and IShares ESG 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 1 and IShares ESG into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Invesco 1 5 Year and iShares ESG Aware, you can compare the effects of market volatilities on Invesco 1 and IShares ESG 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 1 with a short position of IShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco 1 and IShares ESG.

Diversification Opportunities for Invesco 1 and IShares ESG

0.57

Correlation Coefficient

Invesco 1  IShares ESG

Very weak diversification

The 3 months correlation between Invesco and IShares is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Invesco 1 5 Year and iShares ESG Aware in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Aware and Invesco 1 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 1 5 Year are associated (or correlated) with IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Aware has no effect on the direction of Invesco 1 i.e., Invesco 1 and IShares ESG go up and down completely randomly.

Pair Corralation between Invesco 1 and IShares ESG

Assuming the 90 days trading horizon Invesco 1 5 Year is expected to generate 1.34 times more return on investment than IShares ESG. However, Invesco 1 is 1.34 times more volatile than iShares ESG Aware. It trades about 0.11 of its potential returns per unit of risk. iShares ESG Aware is currently generating about 0.15 per unit of risk. If you would invest  1,797  in Invesco 1 5 Year on December 5, 2024 and sell it today you would earn a total of  8.00  from holding Invesco 1 5 Year or generate 0.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Invesco 1 5 Year  vs.  iShares ESG Aware

Invesco 1 5

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco 1 5 Year are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, Invesco 1 is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

iShares ESG Aware

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Aware are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares ESG is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Invesco 1 and IShares ESG

The main advantage of trading using opposite Invesco 1 and IShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco 1 position performs unexpectedly, IShares ESG 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 ESG will offset losses from the drop in IShares ESG's long position.

The idea behind Invesco 1 5 Year and iShares ESG Aware 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.