Correlation Between IShares Short and Invesco Ultra

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

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

Diversification Opportunities for IShares Short and Invesco Ultra

0.13

Correlation Coefficient

IShares Short  Invesco Ultra

Average diversification

The 3 months correlation between IShares and Invesco is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding iShares Short Maturity and Invesco Ultra Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Ultra Short and IShares Short 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 Short Maturity are associated (or correlated) with Invesco Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Ultra Short has no effect on the direction of IShares Short i.e., IShares Short and Invesco Ultra go up and down completely randomly.

Pair Corralation between IShares Short and Invesco Ultra

Given the investment horizon of 90 days iShares Short Maturity is expected to generate 2.06 times more return on investment than Invesco Ultra. However, IShares Short is 2.06 times more volatile than Invesco Ultra Short. It trades about 0.29 of its potential returns per unit of risk. Invesco Ultra Short is currently generating about 0.56 per unit of risk. If you would invest  4,499  in iShares Short Maturity on August 30, 2024 and sell it today you would earn a total of  580.00  from holding iShares Short Maturity or generate 12.89% return on investment over 90 days.

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

iShares Short Maturity  vs.  Invesco Ultra Short

iShares Short Maturity

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Short Maturity are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, IShares Short is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Invesco Ultra Short

Risk-Adjusted Performance

43 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Ultra Short are ranked lower than 43 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Invesco Ultra 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 Short and Invesco Ultra

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

The idea behind iShares Short Maturity and Invesco Ultra Short 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.