Correlation Between IShares Trust and Invesco Dynamic

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

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

Diversification Opportunities for IShares Trust and Invesco Dynamic

0.96

Correlation Coefficient

IShares Trust  Invesco Dynamic

Almost no diversification

The 3 months correlation between IShares and Invesco is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Invesco Dynamic Building in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Dynamic Building and IShares Trust 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 Trust are associated (or correlated) with Invesco Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Dynamic Building has no effect on the direction of IShares Trust i.e., IShares Trust and Invesco Dynamic go up and down completely randomly.

Pair Corralation between IShares Trust and Invesco Dynamic

Given the investment horizon of 90 days IShares Trust is expected to generate 2.08 times less return on investment than Invesco Dynamic. But when comparing it to its historical volatility, iShares Trust is 2.27 times less risky than Invesco Dynamic. It trades about 0.29 of its potential returns per unit of risk. Invesco Dynamic Building is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  7,161  in Invesco Dynamic Building on May 1, 2025 and sell it today you would earn a total of  1,453  from holding Invesco Dynamic Building or generate 20.29% return on investment over 90 days.

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

iShares Trust  vs.  Invesco Dynamic Building

iShares Trust

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal fundamental indicators, IShares Trust may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Invesco Dynamic Building

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Dynamic Building are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady forward-looking signals, Invesco Dynamic sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Trust and Invesco Dynamic

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

The idea behind iShares Trust and Invesco Dynamic Building 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.