Correlation Between Invesco SP and IShares ESG

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

Diversification Opportunities for Invesco SP and IShares ESG

0.96

Correlation Coefficient

Invesco SP  IShares ESG

Almost no diversification

The 3 months correlation between Invesco and IShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 and iShares ESG MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG MSCI 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 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 MSCI has no effect on the direction of Invesco SP i.e., Invesco SP and IShares ESG go up and down completely randomly.

Pair Corralation between Invesco SP and IShares ESG

Considering the 90-day investment horizon Invesco SP 500 is expected to generate 1.16 times more return on investment than IShares ESG. However, Invesco SP is 1.16 times more volatile than iShares ESG MSCI. It trades about 0.0 of its potential returns per unit of risk. iShares ESG MSCI is currently generating about -0.03 per unit of risk. If you would invest  17,681  in Invesco SP 500 on September 25, 2024 and sell it today you would lose (15.00) from holding Invesco SP 500 or give up 0.08% of portfolio value over 90 days.

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

Invesco SP 500  vs.  iShares ESG MSCI

Invesco SP 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Invesco SP is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

iShares ESG MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Invesco SP and IShares ESG

The main advantage of trading using opposite Invesco SP and IShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco SP 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 SP 500 and iShares ESG MSCI 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.