Correlation Between IShares Regional and Invesco KBW
Can any of the company-specific risk be diversified away by investing in both IShares Regional and Invesco KBW 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 Regional and Invesco KBW into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Regional Banks and Invesco KBW Bank, you can compare the effects of market volatilities on IShares Regional and Invesco KBW 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 Regional with a short position of Invesco KBW. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Regional and Invesco KBW.
Diversification Opportunities for IShares Regional and Invesco KBW
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and Invesco is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding iShares Regional Banks and Invesco KBW Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco KBW Bank and IShares Regional 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 Regional Banks are associated (or correlated) with Invesco KBW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco KBW Bank has no effect on the direction of IShares Regional i.e., IShares Regional and Invesco KBW go up and down completely randomly.
Pair Corralation between IShares Regional and Invesco KBW
Considering the 90-day investment horizon iShares Regional Banks is expected to under-perform the Invesco KBW. In addition to that, IShares Regional is 1.0 times more volatile than Invesco KBW Bank. It trades about -0.13 of its total potential returns per unit of risk. Invesco KBW Bank is currently generating about -0.02 per unit of volatility. If you would invest 7,006 in Invesco KBW Bank on December 4, 2024 and sell it today you would lose (46.00) from holding Invesco KBW Bank or give up 0.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Regional Banks vs. Invesco KBW Bank
Performance |
| Timeline |
| iShares Regional Banks |
| Invesco KBW Bank |
IShares Regional and Invesco KBW Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Regional and Invesco KBW
The main advantage of trading using opposite IShares Regional and Invesco KBW positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Regional position performs unexpectedly, Invesco KBW 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 KBW will offset losses from the drop in Invesco KBW's long position.| IShares Regional vs. iShares Broker Dealers Securities | ||
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| Invesco KBW vs. Invesco KBW Regional | ||
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| Invesco KBW vs. iShares Regional Banks |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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