Correlation Between Invesco DB and United States

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Can any of the company-specific risk be diversified away by investing in both Invesco DB and United States 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 DB and United States into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco DB Energy and United States Oil, you can compare the effects of market volatilities on Invesco DB and United States 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 DB with a short position of United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco DB and United States.

Diversification Opportunities for Invesco DB and United States

0.79
  Correlation Coefficient

Poor diversification

The 3 months correlation between Invesco and United is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DB Energy and United States Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Oil and Invesco DB 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 DB Energy are associated (or correlated) with United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Oil has no effect on the direction of Invesco DB i.e., Invesco DB and United States go up and down completely randomly.

Pair Corralation between Invesco DB and United States

Considering the 90-day investment horizon Invesco DB Energy is expected to under-perform the United States. But the etf apears to be less risky and, when comparing its historical volatility, Invesco DB Energy is 1.22 times less risky than United States. The etf trades about 0.0 of its potential returns per unit of risk. The United States Oil is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  7,791  in United States Oil on December 20, 2023 and sell it today you would earn a total of  7.00  from holding United States Oil or generate 0.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Invesco DB Energy  vs.  United States Oil

 Performance 
       Timeline  
Invesco DB Energy 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DB Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Invesco DB is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.
United States Oil 

Risk-Adjusted Performance

10 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in United States Oil are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, United States displayed solid returns over the last few months and may actually be approaching a breakup point.

Invesco DB and United States Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Invesco DB and United States

The main advantage of trading using opposite Invesco DB and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco DB position performs unexpectedly, United States 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 United States will offset losses from the drop in United States' long position.
The idea behind Invesco DB Energy and United States Oil 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.
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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