Correlation Between Invesco SP and IShares Russell
Can any of the company-specific risk be diversified away by investing in both Invesco SP and IShares Russell 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 Russell 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 Russell 3000, you can compare the effects of market volatilities on Invesco SP and IShares Russell 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 Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and IShares Russell.
Diversification Opportunities for Invesco SP and IShares Russell
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Invesco and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 and iShares Russell 3000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Russell 3000 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 Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Russell 3000 has no effect on the direction of Invesco SP i.e., Invesco SP and IShares Russell go up and down completely randomly.
Pair Corralation between Invesco SP and IShares Russell
Given the investment horizon of 90 days Invesco SP 500 is expected to generate 0.95 times more return on investment than IShares Russell. However, Invesco SP 500 is 1.05 times less risky than IShares Russell. It trades about -0.18 of its potential returns per unit of risk. iShares Russell 3000 is currently generating about -0.2 per unit of risk. If you would invest 5,965 in Invesco SP 500 on January 19, 2024 and sell it today you would lose (165.00) from holding Invesco SP 500 or give up 2.77% of portfolio value 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 Russell 3000
Performance |
| Timeline |
| Invesco SP 500 |
| iShares Russell 3000 |
Invesco SP and IShares Russell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco SP and IShares Russell
The main advantage of trading using opposite Invesco SP and IShares Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco SP position performs unexpectedly, IShares Russell 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 Russell will offset losses from the drop in IShares Russell's long position.| Invesco SP vs. Dimensional Targeted Value | Invesco SP vs. Dimensional World ex | Invesco SP vs. Dimensional Small Cap |
| IShares Russell vs. Dimensional Targeted Value | IShares Russell vs. Dimensional World ex | IShares Russell vs. Dimensional Small Cap |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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