Correlation Between IShares Fallen and Invesco Optimum
Can any of the company-specific risk be diversified away by investing in both IShares Fallen and Invesco Optimum 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 Fallen and Invesco Optimum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Fallen Angels and Invesco Optimum Yield, you can compare the effects of market volatilities on IShares Fallen and Invesco Optimum 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 Fallen with a short position of Invesco Optimum. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Fallen and Invesco Optimum.
Diversification Opportunities for IShares Fallen and Invesco Optimum
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between IShares and Invesco is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding iShares Fallen Angels and Invesco Optimum Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Optimum Yield and IShares Fallen 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 Fallen Angels are associated (or correlated) with Invesco Optimum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Optimum Yield has no effect on the direction of IShares Fallen i.e., IShares Fallen and Invesco Optimum go up and down completely randomly.
Pair Corralation between IShares Fallen and Invesco Optimum
Given the investment horizon of 90 days iShares Fallen Angels is expected to under-perform the Invesco Optimum. But the etf apears to be less risky and, when comparing its historical volatility, iShares Fallen Angels is 4.32 times less risky than Invesco Optimum. The etf trades about -0.02 of its potential returns per unit of risk. The Invesco Optimum Yield is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1,362 in Invesco Optimum Yield on August 25, 2024 and sell it today you would earn a total of 1.00 from holding Invesco Optimum Yield or generate 0.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Fallen Angels vs. Invesco Optimum Yield
Performance |
| Timeline |
| iShares Fallen Angels |
| Invesco Optimum Yield |
IShares Fallen and Invesco Optimum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Fallen and Invesco Optimum
The main advantage of trading using opposite IShares Fallen and Invesco Optimum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Fallen position performs unexpectedly, Invesco Optimum 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 Optimum will offset losses from the drop in Invesco Optimum's long position.| IShares Fallen vs. First Trust Senior | IShares Fallen vs. First Trust Low | IShares Fallen vs. First Trust Enhanced | IShares Fallen vs. First Trust TCW |
| Invesco Optimum vs. First Trust Global | Invesco Optimum vs. iShares ESG Aware | Invesco Optimum vs. iShares Fallen Angels |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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