Correlation Between IShares NASDAQ and Invesco ESG
Can any of the company-specific risk be diversified away by investing in both IShares NASDAQ and Invesco ESG 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 ESG 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 ESG NASDAQ, you can compare the effects of market volatilities on IShares NASDAQ and Invesco ESG 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 ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares NASDAQ and Invesco ESG.
Diversification Opportunities for IShares NASDAQ and Invesco ESG
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and Invesco is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding iShares NASDAQ 100 and Invesco ESG NASDAQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco ESG NASDAQ 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 ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco ESG NASDAQ has no effect on the direction of IShares NASDAQ i.e., IShares NASDAQ and Invesco ESG go up and down completely randomly.
Pair Corralation between IShares NASDAQ and Invesco ESG
Assuming the 90 days trading horizon iShares NASDAQ 100 is expected to generate 1.05 times more return on investment than Invesco ESG. However, IShares NASDAQ is 1.05 times more volatile than Invesco ESG NASDAQ. It trades about 0.09 of its potential returns per unit of risk. Invesco ESG NASDAQ is currently generating about 0.09 per unit of risk. If you would invest 5,123 in iShares NASDAQ 100 on August 27, 2024 and sell it today you would earn a total of 109.00 from holding iShares NASDAQ 100 or generate 2.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
iShares NASDAQ 100 vs. Invesco ESG NASDAQ
Performance |
| Timeline |
| iShares NASDAQ 100 |
| Invesco ESG NASDAQ |
IShares NASDAQ and Invesco ESG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares NASDAQ and Invesco ESG
The main advantage of trading using opposite IShares NASDAQ and Invesco ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares NASDAQ position performs unexpectedly, Invesco ESG 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 ESG will offset losses from the drop in Invesco ESG's long position.The idea behind iShares NASDAQ 100 and Invesco ESG NASDAQ 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.| Invesco ESG vs. Invesco SP International | Invesco ESG vs. Invesco FTSE RAFI | Invesco ESG vs. Invesco SP International | Invesco ESG vs. Invesco 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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