Correlation Between IShares ESG and Invesco SP
Can any of the company-specific risk be diversified away by investing in both IShares ESG 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 ESG 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 ESG Aggregate and Invesco SP International, you can compare the effects of market volatilities on IShares ESG 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 ESG with a short position of Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares ESG and Invesco SP.
Diversification Opportunities for IShares ESG and Invesco SP
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and Invesco is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Aggregate and Invesco SP International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP International 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 Aggregate 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 International has no effect on the direction of IShares ESG i.e., IShares ESG and Invesco SP go up and down completely randomly.
Pair Corralation between IShares ESG and Invesco SP
Given the investment horizon of 90 days IShares ESG is expected to generate 1.32 times less return on investment than Invesco SP. But when comparing it to its historical volatility, iShares ESG Aggregate is 1.94 times less risky than Invesco SP. It trades about 0.1 of its potential returns per unit of risk. Invesco SP International is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,747 in Invesco SP International on September 3, 2024 and sell it today you would earn a total of 174.00 from holding Invesco SP International or generate 6.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares ESG Aggregate vs. Invesco SP International
Performance |
| Timeline |
| iShares ESG Aggregate |
| Invesco SP International |
IShares ESG and Invesco SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares ESG and Invesco SP
The main advantage of trading using opposite IShares ESG and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares ESG 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.| IShares ESG vs. ClearShares Ultra Short Maturity | IShares ESG vs. PGIM Active High | IShares ESG vs. Pacer Trendpilot Bond | IShares ESG vs. Pacer Lunt Large |
| Invesco SP vs. iShares Core SP | Invesco SP vs. iShares Core 1 5 | Invesco SP vs. iShares Core MSCI | Invesco SP vs. iShares Core MSCI |
Check out your portfolio center.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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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