Correlation Between IShares Utilities and Invesco SP
Can any of the company-specific risk be diversified away by investing in both IShares Utilities 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 Utilities 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 Utilities ETF and Invesco SP Spin Off, you can compare the effects of market volatilities on IShares Utilities 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 Utilities with a short position of Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Utilities and Invesco SP.
Diversification Opportunities for IShares Utilities and Invesco SP
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and Invesco is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding iShares Utilities ETF and Invesco SP Spin Off in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP Spin and IShares Utilities 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 Utilities ETF 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 Spin has no effect on the direction of IShares Utilities i.e., IShares Utilities and Invesco SP go up and down completely randomly.
Pair Corralation between IShares Utilities and Invesco SP
Considering the 90-day investment horizon IShares Utilities is expected to generate 2.21 times less return on investment than Invesco SP. But when comparing it to its historical volatility, iShares Utilities ETF is 1.21 times less risky than Invesco SP. It trades about 0.05 of its potential returns per unit of risk. Invesco SP Spin Off is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 5,360 in Invesco SP Spin Off on August 28, 2024 and sell it today you would earn a total of 3,637 from holding Invesco SP Spin Off or generate 67.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Utilities ETF vs. Invesco SP Spin Off
Performance |
| Timeline |
| iShares Utilities ETF |
| Invesco SP Spin |
IShares Utilities and Invesco SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Utilities and Invesco SP
The main advantage of trading using opposite IShares Utilities and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Utilities 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 Utilities vs. iShares Industrials ETF | IShares Utilities vs. iShares Consumer Discretionary | IShares Utilities vs. iShares Consumer Staples | IShares Utilities vs. iShares Telecommunications ETF |
| Invesco SP vs. Vanguard Mid Cap Index | Invesco SP vs. iShares Core SP | Invesco SP vs. SPDR SP MIDCAP | Invesco SP vs. First Trust Dorsey |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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