Correlation Between IShares Industrials and Invesco SP
Can any of the company-specific risk be diversified away by investing in both IShares Industrials and Invesco SP 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 Industrials and Invesco SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Industrials ETF and Invesco SP 500, you can compare the effects of market volatilities on IShares Industrials and Invesco SP 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 Industrials with a short position of Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Industrials and Invesco SP.
Diversification Opportunities for IShares Industrials and Invesco SP
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and Invesco is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding iShares Industrials ETF and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 500 and IShares Industrials 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 Industrials ETF are associated (or correlated) with Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP 500 has no effect on the direction of IShares Industrials i.e., IShares Industrials and Invesco SP go up and down completely randomly.
Pair Corralation between IShares Industrials and Invesco SP
Considering the 90-day investment horizon iShares Industrials ETF is expected to generate 0.99 times more return on investment than Invesco SP. However, iShares Industrials ETF is 1.01 times less risky than Invesco SP. It trades about 0.33 of its potential returns per unit of risk. Invesco SP 500 is currently generating about 0.31 per unit of risk. If you would invest 13,317 in iShares Industrials ETF on September 1, 2024 and sell it today you would earn a total of 1,076 from holding iShares Industrials ETF or generate 8.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Industrials ETF vs. Invesco SP 500
Performance |
| Timeline |
| iShares Industrials ETF |
| Invesco SP 500 |
IShares Industrials and Invesco SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Industrials and Invesco SP
The main advantage of trading using opposite IShares Industrials and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Industrials position performs unexpectedly, Invesco SP 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 SP will offset losses from the drop in Invesco SP's long position.| IShares Industrials vs. iShares Consumer Discretionary | IShares Industrials vs. iShares Consumer Staples | IShares Industrials vs. iShares Basic Materials | IShares Industrials 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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