Correlation Between Invesco DWA and IShares Global

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

Diversification Opportunities for Invesco DWA and IShares Global

-0.45

Correlation Coefficient

Invesco DWA  IShares Global

Very good diversification

The 3 months correlation between Invesco and IShares is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DWA Consumer and iShares Global Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Utilities and Invesco DWA 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 DWA Consumer 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 Utilities has no effect on the direction of Invesco DWA i.e., Invesco DWA and IShares Global go up and down completely randomly.

Pair Corralation between Invesco DWA and IShares Global

Considering the 90-day investment horizon Invesco DWA Consumer is expected to generate 0.75 times more return on investment than IShares Global. However, Invesco DWA Consumer is 1.34 times less risky than IShares Global. It trades about 0.22 of its potential returns per unit of risk. iShares Global Utilities is currently generating about -0.08 per unit of risk. If you would invest  10,076  in Invesco DWA Consumer on September 17, 2024 and sell it today you would earn a total of  910.00  from holding Invesco DWA Consumer or generate 9.03% return on investment over 90 days.

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

Invesco DWA Consumer  vs.  iShares Global Utilities

Invesco DWA Consumer

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DWA Consumer are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Invesco DWA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares Global Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Global Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, IShares Global is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Invesco DWA and IShares Global

The main advantage of trading using opposite Invesco DWA and IShares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco DWA 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 DWA Consumer and iShares Global Utilities 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..