Correlation Between Invesco DB and MicroSectorsTM Oil
Can any of the company-specific risk be diversified away by investing in both Invesco DB and MicroSectorsTM Oil 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 MicroSectorsTM Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco DB Oil and MicroSectorsTM Oil Gas, you can compare the effects of market volatilities on Invesco DB and MicroSectorsTM Oil 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 MicroSectorsTM Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco DB and MicroSectorsTM Oil.
Diversification Opportunities for Invesco DB and MicroSectorsTM Oil
-0.94 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Invesco and MicroSectorsTM is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DB Oil and MicroSectorsTM Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectorsTM Oil Gas 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 Oil are associated (or correlated) with MicroSectorsTM Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectorsTM Oil Gas has no effect on the direction of Invesco DB i.e., Invesco DB and MicroSectorsTM Oil go up and down completely randomly.
Pair Corralation between Invesco DB and MicroSectorsTM Oil
Considering the 90-day investment horizon Invesco DB Oil is expected to generate 0.34 times more return on investment than MicroSectorsTM Oil. However, Invesco DB Oil is 2.92 times less risky than MicroSectorsTM Oil. It trades about 0.14 of its potential returns per unit of risk. MicroSectorsTM Oil Gas is currently generating about -0.27 per unit of risk. If you would invest 1,446 in Invesco DB Oil on January 24, 2024 and sell it today you would earn a total of 113.00 from holding Invesco DB Oil or generate 7.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco DB Oil vs. MicroSectorsTM Oil Gas
Performance |
| Timeline |
| Invesco DB Oil |
| MicroSectorsTM Oil Gas |
Invesco DB and MicroSectorsTM Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco DB and MicroSectorsTM Oil
The main advantage of trading using opposite Invesco DB and MicroSectorsTM Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco DB position performs unexpectedly, MicroSectorsTM Oil 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 MicroSectorsTM Oil will offset losses from the drop in MicroSectorsTM Oil's long position.| Invesco DB vs. Invesco DB Energy | Invesco DB vs. United States 12 | Invesco DB vs. Invesco DB Base | Invesco DB vs. Invesco DB Precious |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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