Correlation Between Invesco SP and IShares Russell

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

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

Diversification Opportunities for Invesco SP and IShares Russell

0.92

Correlation Coefficient

Invesco SP  IShares Russell

Almost no diversification

The 3 months correlation between Invesco and IShares is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP MidCap and iShares Russell Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Russell Mid and Invesco SP 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 SP MidCap are associated (or correlated) with IShares Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Russell Mid has no effect on the direction of Invesco SP i.e., Invesco SP and IShares Russell go up and down completely randomly.

Pair Corralation between Invesco SP and IShares Russell

Considering the 90-day investment horizon Invesco SP is expected to generate 1.21 times less return on investment than IShares Russell. In addition to that, Invesco SP is 1.12 times more volatile than iShares Russell Mid Cap. It trades about 0.07 of its total potential returns per unit of risk. iShares Russell Mid Cap is currently generating about 0.1 per unit of volatility. If you would invest  8,425  in iShares Russell Mid Cap on September 5, 2024 and sell it today you would earn a total of  5,192  from holding iShares Russell Mid Cap or generate 61.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

Invesco SP MidCap  vs.  iShares Russell Mid Cap

Invesco SP MidCap

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP MidCap are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Invesco SP reported solid returns over the last few months and may actually be approaching a breakup point.

iShares Russell Mid

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell Mid Cap are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, IShares Russell reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invesco SP and IShares Russell

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

The idea behind Invesco SP MidCap and iShares Russell Mid Cap 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.