Correlation Between IShares NASDAQ and Invesco SP
Can any of the company-specific risk be diversified away by investing in both IShares NASDAQ 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 NASDAQ 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 NASDAQ 100 and Invesco SP 500, you can compare the effects of market volatilities on IShares NASDAQ 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 NASDAQ with a short position of Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares NASDAQ and Invesco SP.
Diversification Opportunities for IShares NASDAQ and Invesco SP
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and Invesco is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding iShares NASDAQ 100 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 NASDAQ 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 NASDAQ 100 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 NASDAQ i.e., IShares NASDAQ and Invesco SP go up and down completely randomly.
Pair Corralation between IShares NASDAQ and Invesco SP
Assuming the 90 days trading horizon iShares NASDAQ 100 is expected to generate 1.57 times more return on investment than Invesco SP. However, IShares NASDAQ is 1.57 times more volatile than Invesco SP 500. It trades about 0.17 of its potential returns per unit of risk. Invesco SP 500 is currently generating about 0.12 per unit of risk. If you would invest 5,300 in iShares NASDAQ 100 on September 13, 2024 and sell it today you would earn a total of 171.00 from holding iShares NASDAQ 100 or generate 3.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares NASDAQ 100 vs. Invesco SP 500
Performance |
| Timeline |
| iShares NASDAQ 100 |
| Invesco SP 500 |
IShares NASDAQ and Invesco SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares NASDAQ and Invesco SP
The main advantage of trading using opposite IShares NASDAQ and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares NASDAQ 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 NASDAQ vs. iShares Core SP | IShares NASDAQ vs. iShares SPTSX Capped | IShares NASDAQ vs. BMO NASDAQ 100 | IShares NASDAQ vs. Vanguard SP 500 |
| Invesco SP vs. iShares Core SP | Invesco SP vs. iShares SPTSX Capped | Invesco SP vs. BMO NASDAQ 100 | Invesco SP vs. Vanguard SP 500 |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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