Correlation Between IShares Small and Invesco SP
Can any of the company-specific risk be diversified away by investing in both IShares Small 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 Small 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 Small Cap and Invesco SP 500, you can compare the effects of market volatilities on IShares Small 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 Small with a short position of Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Small and Invesco SP.
Diversification Opportunities for IShares Small and Invesco SP
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and Invesco is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding iShares Small Cap 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 Small 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 Small Cap 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 Small i.e., IShares Small and Invesco SP go up and down completely randomly.
Pair Corralation between IShares Small and Invesco SP
Given the investment horizon of 90 days IShares Small is expected to generate 1.26 times less return on investment than Invesco SP. In addition to that, IShares Small is 1.05 times more volatile than Invesco SP 500. It trades about 0.04 of its total potential returns per unit of risk. Invesco SP 500 is currently generating about 0.06 per unit of volatility. If you would invest 6,620 in Invesco SP 500 on September 3, 2024 and sell it today you would earn a total of 2,689 from holding Invesco SP 500 or generate 40.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Small Cap vs. Invesco SP 500
Performance |
| Timeline |
| iShares Small Cap |
| Invesco SP 500 |
IShares Small and Invesco SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Small and Invesco SP
The main advantage of trading using opposite IShares Small and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Small 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 Small vs. Horizon Kinetics Inflation | IShares Small vs. Virtus ETF Trust | IShares Small vs. Invesco SP SmallCap | IShares Small vs. iShares MSCI USA |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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