Correlation Between Invesco Water and IShares Lithium
Can any of the company-specific risk be diversified away by investing in both Invesco Water and IShares Lithium 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 Invesco Water and IShares Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco Water Resources and iShares Lithium Miners, you can compare the effects of market volatilities on Invesco Water and IShares Lithium 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 Invesco Water with a short position of IShares Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Water and IShares Lithium.
Diversification Opportunities for Invesco Water and IShares Lithium
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Invesco and IShares is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Water Resources and iShares Lithium Miners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Lithium Miners and Invesco Water 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 Invesco Water Resources are associated (or correlated) with IShares Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Lithium Miners has no effect on the direction of Invesco Water i.e., Invesco Water and IShares Lithium go up and down completely randomly.
Pair Corralation between Invesco Water and IShares Lithium
Considering the 90-day investment horizon Invesco Water Resources is expected to generate 0.39 times more return on investment than IShares Lithium. However, Invesco Water Resources is 2.59 times less risky than IShares Lithium. It trades about 0.14 of its potential returns per unit of risk. iShares Lithium Miners is currently generating about 0.01 per unit of risk. If you would invest 6,911 in Invesco Water Resources on August 25, 2024 and sell it today you would earn a total of 201.00 from holding Invesco Water Resources or generate 2.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco Water Resources vs. iShares Lithium Miners
Performance |
| Timeline |
| Invesco Water Resources |
| iShares Lithium Miners |
Invesco Water and IShares Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco Water and IShares Lithium
The main advantage of trading using opposite Invesco Water and IShares Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Water position performs unexpectedly, IShares Lithium 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 IShares Lithium will offset losses from the drop in IShares Lithium's long position.The idea behind Invesco Water Resources and iShares Lithium Miners pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| IShares Lithium vs. Sprott Junior Copper | IShares Lithium vs. Sprott Junior Uranium | IShares Lithium vs. Sprott Nickel Miners |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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