Correlation Between IShares Global and Invesco DB

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

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

Diversification Opportunities for IShares Global and Invesco DB

0.87

Correlation Coefficient

IShares Global  Invesco DB

Very poor diversification

The 3 months correlation between IShares and Invesco is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Timber and Invesco DB Base in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DB Base and IShares Global 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 Global Timber are associated (or correlated) with Invesco DB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DB Base has no effect on the direction of IShares Global i.e., IShares Global and Invesco DB go up and down completely randomly.

Pair Corralation between IShares Global and Invesco DB

Given the investment horizon of 90 days iShares Global Timber is expected to under-perform the Invesco DB. But the etf apears to be less risky and, when comparing its historical volatility, iShares Global Timber is 1.13 times less risky than Invesco DB. The etf trades about -0.16 of its potential returns per unit of risk. The Invesco DB Base is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  2,026  in Invesco DB Base on October 7, 2024 and sell it today you would lose (171.00) from holding Invesco DB Base or give up 8.44% of portfolio value over 90 days.

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

iShares Global Timber  vs.  Invesco DB Base

iShares Global Timber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Global Timber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Invesco DB Base

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco DB Base has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with IShares Global and Invesco DB

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

The idea behind iShares Global Timber and Invesco DB Base 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.