Correlation Between IShares SP and Invesco FTSE
Can any of the company-specific risk be diversified away by investing in both IShares SP and Invesco FTSE 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 SP and Invesco FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares SP 500 and Invesco FTSE RAFI, you can compare the effects of market volatilities on IShares SP and Invesco FTSE 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 SP with a short position of Invesco FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and Invesco FTSE.
Diversification Opportunities for IShares SP and Invesco FTSE
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and Invesco is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and Invesco FTSE RAFI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco FTSE RAFI and IShares SP 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 SP 500 are associated (or correlated) with Invesco FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco FTSE RAFI has no effect on the direction of IShares SP i.e., IShares SP and Invesco FTSE go up and down completely randomly.
Pair Corralation between IShares SP and Invesco FTSE
Assuming the 90 days trading horizon iShares SP 500 is expected to generate 0.94 times more return on investment than Invesco FTSE. However, iShares SP 500 is 1.06 times less risky than Invesco FTSE. It trades about 0.15 of its potential returns per unit of risk. Invesco FTSE RAFI is currently generating about 0.13 per unit of risk. If you would invest 4,660 in iShares SP 500 on September 3, 2024 and sell it today you would earn a total of 1,355 from holding iShares SP 500 or generate 29.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 67.39% |
| Values | Daily Returns |
iShares SP 500 vs. Invesco FTSE RAFI
Performance |
| Timeline |
| iShares SP 500 |
| Invesco FTSE RAFI |
IShares SP and Invesco FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SP and Invesco FTSE
The main advantage of trading using opposite IShares SP and Invesco FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP position performs unexpectedly, Invesco FTSE 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 FTSE will offset losses from the drop in Invesco FTSE's long position.| IShares SP vs. iShares Corp Bond | IShares SP vs. iShares Emerging Asia | IShares SP vs. iShares MSCI Global | IShares SP vs. iShares VII PLC |
| Invesco FTSE vs. Invesco AT1 Capital | Invesco FTSE vs. Invesco EURO STOXX | Invesco FTSE vs. Invesco AT1 Capital | Invesco FTSE vs. Invesco Treasury Bond |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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