Correlation Between Invesco Technology and IShares SP

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

By analyzing existing cross correlation between Invesco Technology SP and iShares SP 500, you can compare the effects of market volatilities on Invesco Technology and IShares SP 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 Invesco Technology with a short position of IShares SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Technology and IShares SP.

Diversification Opportunities for Invesco Technology and IShares SP

-0.67

Correlation Coefficient

Invesco Technology  IShares SP

Excellent diversification

The 3 months correlation between Invesco and IShares is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Technology SP and iShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP 500 and Invesco Technology 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 Invesco Technology SP are associated (or correlated) with IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP 500 has no effect on the direction of Invesco Technology i.e., Invesco Technology and IShares SP go up and down completely randomly.

Pair Corralation between Invesco Technology and IShares SP

Assuming the 90 days trading horizon Invesco Technology SP is expected to generate 1.64 times more return on investment than IShares SP. However, Invesco Technology is 1.64 times more volatile than iShares SP 500. It trades about 0.13 of its potential returns per unit of risk. iShares SP 500 is currently generating about -0.21 per unit of risk. If you would invest  63,710  in Invesco Technology SP on September 13, 2024 and sell it today you would earn a total of  5,850  from holding Invesco Technology SP or generate 9.18% return on investment over 90 days.

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

Invesco Technology SP  vs.  iShares SP 500

Invesco Technology

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Technology SP are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Invesco Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares SP 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares SP 500 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 stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Pair Trading with Invesco Technology and IShares SP

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

The idea behind Invesco Technology SP and iShares SP 500 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.