Can any of the company-specific risk be diversified away by investing in both Nushares ETF 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 Nushares ETF and Invesco ESG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nushares ETF Trust and Invesco ESG NASDAQ, you can compare the effects of market volatilities on Nushares ETF 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 Nushares ETF with a short position of Invesco ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nushares ETF and Invesco ESG.
Diversification Opportunities for Nushares ETF and Invesco ESG
The 3 months correlation between Nushares and Invesco is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Nushares ETF Trust 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 Nushares ETF 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 Nushares ETF Trust 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 Nushares ETF i.e., Nushares ETF and Invesco ESG go up and down completely randomly.
Pair Corralation between Nushares ETF and Invesco ESG
Given the investment horizon of 90 days Nushares ETF is expected to generate 1.06 times less return on investment than Invesco ESG. But when comparing it to its historical volatility, Nushares ETF Trust is 1.34 times less risky than Invesco ESG. It trades about 0.05 of its potential returns per unit of risk. Invesco ESG NASDAQ is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,765 in Invesco ESG NASDAQ on March 6, 2024 and sell it today you would earn a total of 396.00 from holding Invesco ESG NASDAQ or generate 22.44% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Nushares ETF Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, Nushares ETF is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
Over the last 90 days Invesco ESG NASDAQ has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking indicators, Invesco ESG is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.