Correlation Between Invesco SP and IShares Consumer
Can any of the company-specific risk be diversified away by investing in both Invesco SP and IShares Consumer 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 SP and IShares Consumer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco SP 500 and iShares Consumer Discretionary, you can compare the effects of market volatilities on Invesco SP and IShares Consumer 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 SP with a short position of IShares Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and IShares Consumer.
Diversification Opportunities for Invesco SP and IShares Consumer
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Invesco and IShares is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 and iShares Consumer Discretionary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Consumer Dis and Invesco SP 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 SP 500 are associated (or correlated) with IShares Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Consumer Dis has no effect on the direction of Invesco SP i.e., Invesco SP and IShares Consumer go up and down completely randomly.
Pair Corralation between Invesco SP and IShares Consumer
Considering the 90-day investment horizon Invesco SP is expected to generate 1.44 times less return on investment than IShares Consumer. But when comparing it to its historical volatility, Invesco SP 500 is 1.05 times less risky than IShares Consumer. It trades about 0.17 of its potential returns per unit of risk. iShares Consumer Discretionary is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 8,788 in iShares Consumer Discretionary on August 26, 2024 and sell it today you would earn a total of 811.00 from holding iShares Consumer Discretionary or generate 9.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco SP 500 vs. iShares Consumer Discretionary
Performance |
| Timeline |
| Invesco SP 500 |
| iShares Consumer Dis |
Invesco SP and IShares Consumer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco SP and IShares Consumer
The main advantage of trading using opposite Invesco SP and IShares Consumer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco SP position performs unexpectedly, IShares Consumer 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 Consumer will offset losses from the drop in IShares Consumer's long position.The idea behind Invesco SP 500 and iShares Consumer Discretionary 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 Consumer vs. VanEck Pharmaceutical ETF | IShares Consumer vs. VanEck Biotech ETF | IShares Consumer vs. VanEck Oil Services | IShares Consumer vs. iShares Transportation Average |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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