Correlation Between IShares Short and Invesco National

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

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

Diversification Opportunities for IShares Short and Invesco National

0.53

Correlation Coefficient

IShares Short  Invesco National

Very weak diversification

The 3 months correlation between IShares and Invesco is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding iShares Short Term National and Invesco National AMT Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco National AMT and IShares Short 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 iShares Short Term National are associated (or correlated) with Invesco National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco National AMT has no effect on the direction of IShares Short i.e., IShares Short and Invesco National go up and down completely randomly.

Pair Corralation between IShares Short and Invesco National

Considering the 90-day investment horizon iShares Short Term National is expected to generate 0.34 times more return on investment than Invesco National. However, iShares Short Term National is 2.9 times less risky than Invesco National. It trades about 0.03 of its potential returns per unit of risk. Invesco National AMT Free is currently generating about -0.33 per unit of risk. If you would invest  10,555  in iShares Short Term National on October 10, 2024 and sell it today you would earn a total of  7.00  from holding iShares Short Term National or generate 0.07% return on investment over 90 days.

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

iShares Short Term National  vs.  Invesco National AMT Free

iShares Short Term

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Short Term National are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco National AMT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco National AMT Free has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Invesco National is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Short and Invesco National

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

The idea behind iShares Short Term National and Invesco National AMT Free 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.