Correlation Between IShares Consumer and Invesco
Can any of the company-specific risk be diversified away by investing in both IShares Consumer and Invesco 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 Consumer and Invesco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Consumer Discretionary and Invesco, you can compare the effects of market volatilities on IShares Consumer and Invesco 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 Consumer with a short position of Invesco. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Consumer and Invesco.
Diversification Opportunities for IShares Consumer and Invesco
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and Invesco is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding iShares Consumer Discretionary and Invesco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco and IShares Consumer 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 Consumer Discretionary are associated (or correlated) with Invesco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco has no effect on the direction of IShares Consumer i.e., IShares Consumer and Invesco go up and down completely randomly.
Pair Corralation between IShares Consumer and Invesco
Considering the 90-day investment horizon IShares Consumer is expected to generate 1.86 times less return on investment than Invesco. But when comparing it to its historical volatility, iShares Consumer Discretionary is 1.05 times less risky than Invesco. It trades about 0.12 of its potential returns per unit of risk. Invesco is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 7,154 in Invesco on August 31, 2024 and sell it today you would earn a total of 808.00 from holding Invesco or generate 11.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 13.45% |
| Values | Daily Returns |
iShares Consumer Discretionary vs. Invesco
Performance |
| Timeline |
| iShares Consumer Dis |
| Invesco |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
IShares Consumer and Invesco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Consumer and Invesco
The main advantage of trading using opposite IShares Consumer and Invesco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Consumer position performs unexpectedly, Invesco 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 will offset losses from the drop in Invesco's long position.| IShares Consumer vs. iShares Consumer Staples | IShares Consumer vs. iShares Industrials ETF | IShares Consumer vs. iShares Basic Materials | IShares Consumer vs. iShares Utilities ETF |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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