Correlation Between MicroSectorsTM Oil and Invesco DB

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

Diversification Opportunities for MicroSectorsTM Oil and Invesco DB

-0.83
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between MicroSectorsTM and Invesco is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectorsTM Oil Gas and Invesco DB Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DB Oil and MicroSectorsTM Oil 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 MicroSectorsTM Oil Gas are associated (or correlated) with Invesco DB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DB Oil has no effect on the direction of MicroSectorsTM Oil i.e., MicroSectorsTM Oil and Invesco DB go up and down completely randomly.

Pair Corralation between MicroSectorsTM Oil and Invesco DB

Given the investment horizon of 90 days MicroSectorsTM Oil Gas is expected to under-perform the Invesco DB. In addition to that, MicroSectorsTM Oil is 2.38 times more volatile than Invesco DB Oil. It trades about -0.03 of its total potential returns per unit of risk. Invesco DB Oil is currently generating about 0.03 per unit of volatility. If you would invest  1,400  in Invesco DB Oil on December 29, 2023 and sell it today you would earn a total of  141.00  from holding Invesco DB Oil or generate 10.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy99.66%
ValuesDaily Returns

MicroSectorsTM Oil Gas  vs.  Invesco DB Oil

 Performance 
       Timeline  
MicroSectorsTM Oil Gas 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days MicroSectorsTM Oil Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's essential indicators remain rather sound which may send shares a bit higher in April 2024. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.
Invesco DB Oil 

Risk-Adjusted Performance

12 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DB Oil are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental drivers, Invesco DB may actually be approaching a critical reversion point that can send shares even higher in April 2024.

MicroSectorsTM Oil and Invesco DB Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MicroSectorsTM Oil and Invesco DB

The main advantage of trading using opposite MicroSectorsTM Oil and Invesco DB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectorsTM Oil position performs unexpectedly, Invesco DB 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 DB will offset losses from the drop in Invesco DB's long position.
The idea behind MicroSectorsTM Oil Gas and Invesco DB 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.
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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.

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