Correlation Between IShares ESG and Invesco Investment

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

By analyzing existing cross correlation between iShares ESG 1 5 and Invesco Investment Grade, you can compare the effects of market volatilities on IShares ESG and Invesco Investment 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 ESG with a short position of Invesco Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares ESG and Invesco Investment.

Diversification Opportunities for IShares ESG and Invesco Investment

0.89

Correlation Coefficient

IShares ESG  Invesco Investment

Very poor diversification

The 3 months correlation between IShares and Invesco is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG 1 5 and Invesco Investment Grade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Investment Grade and IShares ESG 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 ESG 1 5 are associated (or correlated) with Invesco Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Investment Grade has no effect on the direction of IShares ESG i.e., IShares ESG and Invesco Investment go up and down completely randomly.

Pair Corralation between IShares ESG and Invesco Investment

Given the investment horizon of 90 days iShares ESG 1 5 is expected to generate 0.74 times more return on investment than Invesco Investment. However, iShares ESG 1 5 is 1.35 times less risky than Invesco Investment. It trades about 0.08 of its potential returns per unit of risk. Invesco Investment Grade is currently generating about 0.03 per unit of risk. If you would invest  2,461  in iShares ESG 1 5 on October 27, 2024 and sell it today you would earn a total of  16.00  from holding iShares ESG 1 5 or generate 0.65% return on investment over 90 days.

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

iShares ESG 1 5  vs.  Invesco Investment Grade

iShares ESG 1

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG 1 5 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares ESG is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco Investment Grade

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Investment Grade are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Invesco Investment is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares ESG and Invesco Investment

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

The idea behind iShares ESG 1 5 and Invesco Investment Grade 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.