Correlation Between Invesco Dynamic and IShares Utilities

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

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

Diversification Opportunities for Invesco Dynamic and IShares Utilities

0.61

Correlation Coefficient

Invesco Dynamic  IShares Utilities

Poor diversification

The 3 months correlation between Invesco and IShares is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Dynamic Large and iShares Utilities ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Utilities ETF and Invesco Dynamic 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 Dynamic Large are associated (or correlated) with IShares Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Utilities ETF has no effect on the direction of Invesco Dynamic i.e., Invesco Dynamic and IShares Utilities go up and down completely randomly.

Pair Corralation between Invesco Dynamic and IShares Utilities

Considering the 90-day investment horizon Invesco Dynamic Large is expected to generate 0.82 times more return on investment than IShares Utilities. However, Invesco Dynamic Large is 1.22 times less risky than IShares Utilities. It trades about -0.06 of its potential returns per unit of risk. iShares Utilities ETF is currently generating about -0.07 per unit of risk. If you would invest  5,805  in Invesco Dynamic Large on September 20, 2024 and sell it today you would lose (172.00) from holding Invesco Dynamic Large or give up 2.96% of portfolio value over 90 days.

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

Invesco Dynamic Large  vs.  iShares Utilities ETF

Invesco Dynamic Large

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Dynamic Large has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Invesco Dynamic is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

iShares Utilities ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Utilities ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, IShares Utilities is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Invesco Dynamic and IShares Utilities

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

The idea behind Invesco Dynamic Large and iShares Utilities ETF 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 Anywhere module to track or share privately all of your investments from the convenience of any device.