Correlation Between Invesco FTSE and IShares SP
Can any of the company-specific risk be diversified away by investing in both Invesco FTSE and IShares 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 Invesco FTSE and IShares SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco FTSE RAFI and iShares SP Mid Cap, you can compare the effects of market volatilities on Invesco FTSE and IShares 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 Invesco FTSE with a short position of IShares SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco FTSE and IShares SP.
Diversification Opportunities for Invesco FTSE and IShares SP
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Invesco and IShares is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Invesco FTSE RAFI and iShares SP Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP Mid and Invesco FTSE 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 FTSE RAFI are associated (or correlated) with IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP Mid has no effect on the direction of Invesco FTSE i.e., Invesco FTSE and IShares SP go up and down completely randomly.
Pair Corralation between Invesco FTSE and IShares SP
Assuming the 90 days trading horizon Invesco FTSE RAFI is expected to generate 0.53 times more return on investment than IShares SP. However, Invesco FTSE RAFI is 1.9 times less risky than IShares SP. It trades about -0.12 of its potential returns per unit of risk. iShares SP Mid Cap is currently generating about -0.31 per unit of risk. If you would invest 5,308 in Invesco FTSE RAFI on December 1, 2024 and sell it today you would lose (59.00) from holding Invesco FTSE RAFI or give up 1.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco FTSE RAFI vs. iShares SP Mid Cap
Performance |
| Timeline |
| Invesco FTSE RAFI |
| iShares SP Mid |
Invesco FTSE and IShares SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco FTSE and IShares SP
The main advantage of trading using opposite Invesco FTSE and IShares SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco FTSE position performs unexpectedly, IShares 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 IShares SP will offset losses from the drop in IShares SP's long position.The idea behind Invesco FTSE RAFI and iShares SP Mid Cap 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 SP vs. iShares SP Mid Cap | IShares SP vs. iShares Small Cap | IShares SP vs. iShares SP Small Cap | IShares SP vs. iShares SPTSX Small |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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