Correlation Between IShares Financials and Invesco KBW
Can any of the company-specific risk be diversified away by investing in both IShares Financials and Invesco KBW 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 Financials and Invesco KBW into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Financials ETF and Invesco KBW High, you can compare the effects of market volatilities on IShares Financials and Invesco KBW 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 Financials with a short position of Invesco KBW. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Financials and Invesco KBW.
Diversification Opportunities for IShares Financials and Invesco KBW
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and Invesco is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding iShares Financials ETF and Invesco KBW High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco KBW High and IShares Financials 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 Financials ETF are associated (or correlated) with Invesco KBW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco KBW High has no effect on the direction of IShares Financials i.e., IShares Financials and Invesco KBW go up and down completely randomly.
Pair Corralation between IShares Financials and Invesco KBW
Considering the 90-day investment horizon iShares Financials ETF is expected to generate 0.85 times more return on investment than Invesco KBW. However, iShares Financials ETF is 1.18 times less risky than Invesco KBW. It trades about 0.1 of its potential returns per unit of risk. Invesco KBW High is currently generating about 0.04 per unit of risk. If you would invest 7,460 in iShares Financials ETF on September 2, 2024 and sell it today you would earn a total of 4,445 from holding iShares Financials ETF or generate 59.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Financials ETF vs. Invesco KBW High
Performance |
| Timeline |
| iShares Financials ETF |
| Invesco KBW High |
IShares Financials and Invesco KBW Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Financials and Invesco KBW
The main advantage of trading using opposite IShares Financials and Invesco KBW positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Financials position performs unexpectedly, Invesco KBW 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 KBW will offset losses from the drop in Invesco KBW's long position.| IShares Financials vs. iShares Financial Services | IShares Financials vs. iShares Industrials ETF | IShares Financials vs. iShares Consumer Discretionary | IShares Financials vs. iShares Healthcare ETF |
| Invesco KBW vs. First Trust Exchange Traded | Invesco KBW vs. Ultimus Managers Trust | Invesco KBW vs. Horizon Kinetics Medical | Invesco KBW vs. Harbor Health Care |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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