Correlation Between IShares Trust and Invesco QQQ
Can any of the company-specific risk be diversified away by investing in both IShares Trust and Invesco QQQ 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 Trust and Invesco QQQ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Trust and Invesco QQQ Trust, you can compare the effects of market volatilities on IShares Trust and Invesco QQQ 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 Trust with a short position of Invesco QQQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Trust and Invesco QQQ.
Diversification Opportunities for IShares Trust and Invesco QQQ
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and Invesco is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Invesco QQQ Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco QQQ Trust and IShares Trust 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 Trust are associated (or correlated) with Invesco QQQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco QQQ Trust has no effect on the direction of IShares Trust i.e., IShares Trust and Invesco QQQ go up and down completely randomly.
Pair Corralation between IShares Trust and Invesco QQQ
Assuming the 90 days trading horizon IShares Trust is expected to generate 3.18 times less return on investment than Invesco QQQ. But when comparing it to its historical volatility, iShares Trust is 1.19 times less risky than Invesco QQQ. It trades about 0.05 of its potential returns per unit of risk. Invesco QQQ Trust is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 513,952 in Invesco QQQ Trust on September 19, 2024 and sell it today you would earn a total of 543,548 from holding Invesco QQQ Trust or generate 105.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Trust vs. Invesco QQQ Trust
Performance |
| Timeline |
| iShares Trust |
| Invesco QQQ Trust |
IShares Trust and Invesco QQQ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Trust and Invesco QQQ
The main advantage of trading using opposite IShares Trust and Invesco QQQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Trust position performs unexpectedly, Invesco QQQ 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 QQQ will offset losses from the drop in Invesco QQQ's long position.| IShares Trust vs. iShares Trust | IShares Trust vs. iShares Trust | IShares Trust vs. iShares Trust | IShares Trust vs. iShares Trust |
| Invesco QQQ vs. Invesco DB Multi Sector | Invesco QQQ vs. Invesco DB Multi Sector | Invesco QQQ vs. Invesco CurrencyShares Japanese | Invesco QQQ vs. Invesco DB Dollar |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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