Correlation Between Invesco FTSE and IShares SPTSX
Can any of the company-specific risk be diversified away by investing in both Invesco FTSE and IShares SPTSX 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 SPTSX 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 SPTSX 60, you can compare the effects of market volatilities on Invesco FTSE and IShares SPTSX 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 SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco FTSE and IShares SPTSX.
Diversification Opportunities for Invesco FTSE and IShares SPTSX
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Invesco and IShares is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Invesco FTSE RAFI and iShares SPTSX 60 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SPTSX 60 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 SPTSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SPTSX 60 has no effect on the direction of Invesco FTSE i.e., Invesco FTSE and IShares SPTSX go up and down completely randomly.
Pair Corralation between Invesco FTSE and IShares SPTSX
Assuming the 90 days trading horizon Invesco FTSE RAFI is expected to generate 1.67 times more return on investment than IShares SPTSX. However, Invesco FTSE is 1.67 times more volatile than iShares SPTSX 60. It trades about 0.34 of its potential returns per unit of risk. iShares SPTSX 60 is currently generating about 0.35 per unit of risk. If you would invest 2,500 in Invesco FTSE RAFI on September 13, 2024 and sell it today you would earn a total of 125.00 from holding Invesco FTSE RAFI or generate 5.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco FTSE RAFI vs. iShares SPTSX 60
Performance |
| Timeline |
| Invesco FTSE RAFI |
| iShares SPTSX 60 |
Invesco FTSE and IShares SPTSX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco FTSE and IShares SPTSX
The main advantage of trading using opposite Invesco FTSE and IShares SPTSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco FTSE position performs unexpectedly, IShares SPTSX 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 SPTSX will offset losses from the drop in IShares SPTSX's long position.| Invesco FTSE vs. Invesco SP International | Invesco FTSE vs. Invesco FTSE RAFI | Invesco FTSE vs. Invesco ESG NASDAQ | Invesco FTSE vs. Invesco SP International |
| IShares SPTSX vs. iShares Core SP | IShares SPTSX vs. iShares Core SPTSX | IShares SPTSX vs. iShares SPTSX Capped | IShares SPTSX vs. iShares SPTSX Capped |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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