Correlation Between IShares IBoxx and Invesco Fundamental

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

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

Diversification Opportunities for IShares IBoxx and Invesco Fundamental

0.46

Correlation Coefficient

IShares IBoxx  Invesco Fundamental

Very weak diversification

The 3 months correlation between IShares and Invesco is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding iShares iBoxx Investment and Invesco Fundamental High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Fundamental High and IShares IBoxx 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 iBoxx Investment are associated (or correlated) with Invesco Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Fundamental High has no effect on the direction of IShares IBoxx i.e., IShares IBoxx and Invesco Fundamental go up and down completely randomly.

Pair Corralation between IShares IBoxx and Invesco Fundamental

Considering the 90-day investment horizon iShares iBoxx Investment is expected to under-perform the Invesco Fundamental. In addition to that, IShares IBoxx is 1.94 times more volatile than Invesco Fundamental High. It trades about -0.02 of its total potential returns per unit of risk. Invesco Fundamental High is currently generating about 0.09 per unit of volatility. If you would invest  1,815  in Invesco Fundamental High on September 4, 2024 and sell it today you would earn a total of  23.00  from holding Invesco Fundamental High or generate 1.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

iShares iBoxx Investment  vs.  Invesco Fundamental High

iShares iBoxx Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares iBoxx Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IShares IBoxx is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Invesco Fundamental High

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Fundamental High are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, Invesco Fundamental is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares IBoxx and Invesco Fundamental

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

The idea behind iShares iBoxx Investment and Invesco Fundamental High 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.