Correlation Between Invesco Dynamic and IShares Russell

Can any of the company-specific risk be diversified away by investing in both Invesco Dynamic 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 Dynamic 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 Dynamic Energy and iShares Russell 3000, you can compare the effects of market volatilities on Invesco Dynamic 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 Dynamic with a short position of IShares Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Dynamic and IShares Russell.

Diversification Opportunities for Invesco Dynamic and IShares Russell

0.79

Correlation Coefficient

Invesco Dynamic  IShares Russell

Poor diversification

The 3 months correlation between Invesco and IShares is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Dynamic Energy 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 Dynamic 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 Dynamic Energy 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 Dynamic i.e., Invesco Dynamic and IShares Russell go up and down completely randomly.

Pair Corralation between Invesco Dynamic and IShares Russell

Considering the 90-day investment horizon Invesco Dynamic Energy is expected to generate 1.93 times more return on investment than IShares Russell. However, Invesco Dynamic is 1.93 times more volatile than iShares Russell 3000. It trades about 0.03 of its potential returns per unit of risk. iShares Russell 3000 is currently generating about 0.04 per unit of risk. If you would invest  2,814  in Invesco Dynamic Energy on January 25, 2024 and sell it today you would earn a total of  764.00  from holding Invesco Dynamic Energy or generate 27.15% return on investment over 90 days.

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

Invesco Dynamic Energy  vs.  iShares Russell 3000

Invesco Dynamic Energy

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Dynamic Energy are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Invesco Dynamic exhibited solid returns over the last few months and may actually be approaching a breakup point.

iShares Russell 3000

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell 3000 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares Russell is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Invesco Dynamic and IShares Russell

The main advantage of trading using opposite Invesco Dynamic and IShares Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Dynamic 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.

The idea behind Invesco Dynamic Energy and iShares Russell 3000 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.