Correlation Between IShares Utilities and Invesco DWA
Can any of the company-specific risk be diversified away by investing in both IShares Utilities and Invesco DWA 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 DWA 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 DWA Utilities, you can compare the effects of market volatilities on IShares Utilities and Invesco DWA 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 DWA. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Utilities and Invesco DWA.
Diversification Opportunities for IShares Utilities and Invesco DWA
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and Invesco is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding iShares Utilities ETF and Invesco DWA Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Utilities 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 DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Utilities has no effect on the direction of IShares Utilities i.e., IShares Utilities and Invesco DWA go up and down completely randomly.
Pair Corralation between IShares Utilities and Invesco DWA
Considering the 90-day investment horizon IShares Utilities is expected to generate 1.08 times less return on investment than Invesco DWA. In addition to that, IShares Utilities is 1.04 times more volatile than Invesco DWA Utilities. It trades about 0.18 of its total potential returns per unit of risk. Invesco DWA Utilities is currently generating about 0.2 per unit of volatility. If you would invest 3,125 in Invesco DWA Utilities on August 27, 2024 and sell it today you would earn a total of 1,102 from holding Invesco DWA Utilities or generate 35.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Utilities ETF vs. Invesco DWA Utilities
Performance |
| Timeline |
| iShares Utilities ETF |
| Invesco DWA Utilities |
IShares Utilities and Invesco DWA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Utilities and Invesco DWA
The main advantage of trading using opposite IShares Utilities and Invesco DWA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Utilities position performs unexpectedly, Invesco DWA 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 DWA will offset losses from the drop in Invesco DWA's long position.| IShares Utilities vs. Global X CleanTech | IShares Utilities vs. Global X Clean | IShares Utilities vs. Global X Wind | IShares Utilities vs. Global X Thematic |
| Invesco DWA vs. Invesco DWA Consumer | Invesco DWA vs. Invesco DWA Basic | Invesco DWA vs. Invesco Dynamic Large |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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