Correlation Between IShares and Invesco SP

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

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

Diversification Opportunities for IShares and Invesco SP

-0.49

Correlation Coefficient

IShares  Invesco SP

Very good diversification

The 3 months correlation between IShares and Invesco is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding IShares and Invesco SP SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP SmallCap and IShares 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 are associated (or correlated) with Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP SmallCap has no effect on the direction of IShares i.e., IShares and Invesco SP go up and down completely randomly.

Pair Corralation between IShares and Invesco SP

If you would invest  4,584  in Invesco SP SmallCap on September 15, 2024 and sell it today you would earn a total of  482.00  from holding Invesco SP SmallCap or generate 10.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

IShares  vs.  Invesco SP SmallCap

IShares

Risk-Adjusted Performance

0 of 100

Very Weak

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

Invesco SP SmallCap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP SmallCap are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent fundamental indicators, Invesco SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares and Invesco SP

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

The idea behind IShares and Invesco SP SmallCap 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 Commodity Directory module to find actively traded commodities issued by global exchanges.