Correlation Between Invesco Solar and IShares North

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

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

Diversification Opportunities for Invesco Solar and IShares North

0.49

Correlation Coefficient

Invesco Solar  IShares North

Very weak diversification

The 3 months correlation between Invesco and IShares is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Solar ETF and iShares North American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares North American and Invesco Solar 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 Solar ETF are associated (or correlated) with IShares North. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares North American has no effect on the direction of Invesco Solar i.e., Invesco Solar and IShares North go up and down completely randomly.

Pair Corralation between Invesco Solar and IShares North

Considering the 90-day investment horizon Invesco Solar ETF is expected to generate 8.36 times more return on investment than IShares North. However, Invesco Solar is 8.36 times more volatile than iShares North American. It trades about 0.26 of its potential returns per unit of risk. iShares North American is currently generating about -0.39 per unit of risk. If you would invest  4,261  in Invesco Solar ETF on March 18, 2024 and sell it today you would earn a total of  2,831  from holding Invesco Solar ETF or generate 66.44% return on investment over 90 days.

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

Invesco Solar ETF  vs.  iShares North American

Invesco Solar ETF

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Solar ETF are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Invesco Solar displayed solid returns over the last few months and may actually be approaching a breakup point.

iShares North American

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares North American has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Etf's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with Invesco Solar and IShares North

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

The idea behind Invesco Solar ETF and iShares North American 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.