Correlation Between IShares Core and Invesco Low

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

By analyzing existing cross correlation between iShares Core Growth and Invesco Low Volatility, you can compare the effects of market volatilities on IShares Core and Invesco Low 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 Low. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Invesco Low.

Diversification Opportunities for IShares Core and Invesco Low

0.24

Correlation Coefficient

IShares Core  Invesco Low

Modest diversification

The 3 months correlation between IShares and Invesco is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Growth and Invesco Low Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Low Volatility 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 Growth are associated (or correlated) with Invesco Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Low Volatility has no effect on the direction of IShares Core i.e., IShares Core and Invesco Low go up and down completely randomly.

Pair Corralation between IShares Core and Invesco Low

Assuming the 90 days trading horizon IShares Core is expected to generate 96.4 times less return on investment than Invesco Low. In addition to that, IShares Core is 1.59 times more volatile than Invesco Low Volatility. It trades about 0.0 of its total potential returns per unit of risk. Invesco Low Volatility is currently generating about 0.12 per unit of volatility. If you would invest  2,503  in Invesco Low Volatility on December 30, 2024 and sell it today you would earn a total of  77.00  from holding Invesco Low Volatility or generate 3.08% return on investment over 90 days.

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

iShares Core Growth  vs.  Invesco Low Volatility

iShares Core Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Core Growth has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares Core is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Invesco Low Volatility

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Low Volatility are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Invesco Low is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Core and Invesco Low

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

The idea behind iShares Core Growth and Invesco Low Volatility 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 Global Correlations module to find global opportunities by holding instruments from different markets.