Correlation Between IShares International and Invesco International

Can any of the company-specific risk be diversified away by investing in both IShares International and Invesco International 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 International and Invesco International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares International Select and Invesco International Dividend, you can compare the effects of market volatilities on IShares International and Invesco International 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 International with a short position of Invesco International. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares International and Invesco International.

Diversification Opportunities for IShares International and Invesco International

0.6

Correlation Coefficient

IShares International  Invesco International

Poor diversification

The 3 months correlation between IShares and Invesco is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding iShares International Select and Invesco International Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco International and IShares International 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 International Select are associated (or correlated) with Invesco International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco International has no effect on the direction of IShares International i.e., IShares International and Invesco International go up and down completely randomly.

Pair Corralation between IShares International and Invesco International

Considering the 90-day investment horizon iShares International Select is expected to generate 1.03 times more return on investment than Invesco International. However, IShares International is 1.03 times more volatile than Invesco International Dividend. It trades about 0.09 of its potential returns per unit of risk. Invesco International Dividend is currently generating about -0.01 per unit of risk. If you would invest  2,822  in iShares International Select on February 9, 2024 and sell it today you would earn a total of  50.00  from holding iShares International Select or generate 1.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

iShares International Select  vs.  Invesco International Dividend

iShares International

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares International Select are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, IShares International may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Invesco International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco International Dividend are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, Invesco International is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares International and Invesco International

The main advantage of trading using opposite IShares International and Invesco International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares International position performs unexpectedly, Invesco International 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 International will offset losses from the drop in Invesco International's long position.

The idea behind iShares International Select and Invesco International Dividend 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.

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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.