Correlation Between Invesco DB and United States

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 Agriculture and United States Copper, 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

0.31

Correlation Coefficient

Invesco DB  United States

Weak diversification

The 3 months correlation between Invesco and United is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DB Agriculture and United States Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Copper 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 Agriculture 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 Copper 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 is expected to generate 8.7 times less return on investment than United States. But when comparing it to its historical volatility, Invesco DB Agriculture is 1.74 times less risky than United States. It trades about 0.05 of its potential returns per unit of risk. United States Copper is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  2,552  in United States Copper on December 19, 2024 and sell it today you would earn a total of  580.00  from holding United States Copper or generate 22.73% return on investment over 90 days.

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

Invesco DB Agriculture  vs.  United States Copper

Invesco DB Agriculture

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DB Agriculture are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Invesco DB is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

United States Copper

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United States Copper are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, United States reported solid returns over the last few months and may actually be approaching a breakup point.

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 Agriculture and United States Copper 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..