Correlation Between IShares Core and Invesco DB
Can any of the company-specific risk be diversified away by investing in both IShares Core and Invesco DB 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 Core and Invesco DB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core MSCI and Invesco DB Commodity, you can compare the effects of market volatilities on IShares Core and Invesco DB 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 Core with a short position of Invesco DB. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Invesco DB.
Diversification Opportunities for IShares Core and Invesco DB
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and Invesco is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and Invesco DB Commodity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DB Commodity and IShares Core 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 Core MSCI are associated (or correlated) with Invesco DB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DB Commodity has no effect on the direction of IShares Core i.e., IShares Core and Invesco DB go up and down completely randomly.
Pair Corralation between IShares Core and Invesco DB
Given the investment horizon of 90 days iShares Core MSCI is expected to generate 0.9 times more return on investment than Invesco DB. However, iShares Core MSCI is 1.11 times less risky than Invesco DB. It trades about 0.04 of its potential returns per unit of risk. Invesco DB Commodity is currently generating about -0.02 per unit of risk. If you would invest 6,038 in iShares Core MSCI on January 25, 2024 and sell it today you would earn a total of 1,194 from holding iShares Core MSCI or generate 19.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
iShares Core MSCI vs. Invesco DB Commodity
Performance |
| Timeline |
| iShares Core MSCI |
| Invesco DB Commodity |
IShares Core and Invesco DB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and Invesco DB
The main advantage of trading using opposite IShares Core and Invesco DB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, Invesco DB 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 DB will offset losses from the drop in Invesco DB's long position.| IShares Core vs. iShares ESG Aware | IShares Core vs. iShares ESG Aware | IShares Core vs. iShares ESG Aware | IShares Core vs. iShares MSCI USA |
| Invesco DB vs. Invesco DB Agriculture | Invesco DB vs. iShares SP GSCI | Invesco DB vs. Invesco DB Base | Invesco DB vs. iPath Bloomberg Commodity |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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