Correlation Between IShares ESG and Invesco NASDAQ

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

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

Diversification Opportunities for IShares ESG and Invesco NASDAQ

-0.23

Correlation Coefficient

IShares ESG  Invesco NASDAQ

Very good diversification

The 3 months correlation between IShares and Invesco is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG USD and Invesco NASDAQ Future in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco NASDAQ Future and IShares ESG 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 ESG USD are associated (or correlated) with Invesco NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco NASDAQ Future has no effect on the direction of IShares ESG i.e., IShares ESG and Invesco NASDAQ go up and down completely randomly.

Pair Corralation between IShares ESG and Invesco NASDAQ

Given the investment horizon of 90 days iShares ESG USD is expected to under-perform the Invesco NASDAQ. But the etf apears to be less risky and, when comparing its historical volatility, iShares ESG USD is 4.18 times less risky than Invesco NASDAQ. The etf trades about -0.04 of its potential returns per unit of risk. The Invesco NASDAQ Future is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,618  in Invesco NASDAQ Future on September 12, 2024 and sell it today you would earn a total of  423.00  from holding Invesco NASDAQ Future or generate 16.16% return on investment over 90 days.

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

iShares ESG USD  vs.  Invesco NASDAQ Future

iShares ESG USD

Risk-Adjusted Performance

0 of 100

Very Weak

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

Invesco NASDAQ Future

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco NASDAQ Future are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Invesco NASDAQ unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares ESG and Invesco NASDAQ

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

The idea behind iShares ESG USD and Invesco NASDAQ Future 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.