Correlation Between IShares Core and Invesco RAFI
Can any of the company-specific risk be diversified away by investing in both IShares Core and Invesco RAFI 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 Core and Invesco RAFI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core SP and Invesco RAFI Strategic, you can compare the effects of market volatilities on IShares Core and Invesco RAFI 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 Core with a short position of Invesco RAFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Invesco RAFI.
Diversification Opportunities for IShares Core and Invesco RAFI
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and Invesco is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and Invesco RAFI Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco RAFI Strategic and IShares Core 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 Core SP are associated (or correlated) with Invesco RAFI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco RAFI Strategic has no effect on the direction of IShares Core i.e., IShares Core and Invesco RAFI go up and down completely randomly.
Pair Corralation between IShares Core and Invesco RAFI
Given the investment horizon of 90 days iShares Core SP is expected to generate 1.61 times more return on investment than Invesco RAFI. However, IShares Core is 1.61 times more volatile than Invesco RAFI Strategic. It trades about 0.13 of its potential returns per unit of risk. Invesco RAFI Strategic is currently generating about 0.15 per unit of risk. If you would invest 10,008 in iShares Core SP on September 2, 2024 and sell it today you would earn a total of 3,892 from holding iShares Core SP or generate 38.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Core SP vs. Invesco RAFI Strategic
Performance |
| Timeline |
| iShares Core SP |
| Invesco RAFI Strategic |
IShares Core and Invesco RAFI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and Invesco RAFI
The main advantage of trading using opposite IShares Core and Invesco RAFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, Invesco RAFI 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 RAFI will offset losses from the drop in Invesco RAFI's long position.| IShares Core vs. iShares Core SP | IShares Core vs. iShares Core SP | IShares Core vs. iShares Russell Top | IShares Core vs. iShares Core MSCI |
| Invesco RAFI vs. iShares Core SP | Invesco RAFI vs. iShares Core MSCI | Invesco RAFI vs. iShares Broad USD | Invesco RAFI vs. iShares Core SP |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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