Correlation Between Invesco SP and IShares Global

Can any of the company-specific risk be diversified away by investing in both Invesco SP 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 SP 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 SP 500 and iShares Global Consumer, you can compare the effects of market volatilities on Invesco SP 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 SP with a short position of IShares Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and IShares Global.

Diversification Opportunities for Invesco SP and IShares Global

0.44

Correlation Coefficient

Invesco SP  IShares Global

Very weak diversification

The 3 months correlation between Invesco and IShares is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 and iShares Global Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Consumer 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 500 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 Consumer has no effect on the direction of Invesco SP i.e., Invesco SP and IShares Global go up and down completely randomly.

Pair Corralation between Invesco SP and IShares Global

Considering the 90-day investment horizon Invesco SP is expected to generate 1.24 times less return on investment than IShares Global. But when comparing it to its historical volatility, Invesco SP 500 is 1.14 times less risky than IShares Global. It trades about 0.11 of its potential returns per unit of risk. iShares Global Consumer is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  16,040  in iShares Global Consumer on September 27, 2024 and sell it today you would earn a total of  2,965  from holding iShares Global Consumer or generate 18.48% return on investment over 90 days.

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

Invesco SP 500  vs.  iShares Global Consumer

Invesco SP 500

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Invesco SP is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

iShares Global Consumer

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Consumer are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, IShares Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Invesco SP and IShares Global

The main advantage of trading using opposite Invesco SP and IShares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco SP 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 SP 500 and iShares Global Consumer 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.