Correlation Between IShares Core and Invesco 1

Can any of the company-specific risk be diversified away by investing in both IShares Core and Invesco 1 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 Core and Invesco 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for IShares Core and Invesco 1

0.97

Correlation Coefficient

IShares Core  Invesco 1

Almost no diversification

The 3 months correlation between IShares and Invesco is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Canadian and Invesco 1 5 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco 1 5 and IShares Core 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 Core Canadian are associated (or correlated) with Invesco 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco 1 5 has no effect on the direction of IShares Core i.e., IShares Core and Invesco 1 go up and down completely randomly.

Pair Corralation between IShares Core and Invesco 1

Assuming the 90 days trading horizon IShares Core is expected to generate 1.03 times less return on investment than Invesco 1. In addition to that, IShares Core is 1.7 times more volatile than Invesco 1 5 Year. It trades about 0.07 of its total potential returns per unit of risk. Invesco 1 5 Year is currently generating about 0.13 per unit of volatility. If you would invest  1,776  in Invesco 1 5 Year on December 28, 2024 and sell it today you would earn a total of  26.00  from holding Invesco 1 5 Year or generate 1.46% return on investment over 90 days.

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

iShares Core Canadian  vs.  Invesco 1 5 Year

iShares Core Canadian

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core Canadian are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, IShares Core is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Invesco 1 5

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco 1 5 Year are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, Invesco 1 is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Core and Invesco 1

The main advantage of trading using opposite IShares Core and Invesco 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, Invesco 1 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 1 will offset losses from the drop in Invesco 1's long position.

The idea behind iShares Core Canadian and Invesco 1 5 Year 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.