Correlation Between Invesco DB and Harbor Energy

Can any of the company-specific risk be diversified away by investing in both Invesco DB and Harbor Energy 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 Harbor Energy 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 Harbor Energy Transition, you can compare the effects of market volatilities on Invesco DB and Harbor Energy 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 Harbor Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco DB and Harbor Energy.

Diversification Opportunities for Invesco DB and Harbor Energy

0.64

Correlation Coefficient

Invesco DB  Harbor Energy

Poor diversification

The 3 months correlation between Invesco and Harbor is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DB Agriculture and Harbor Energy Transition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor Energy Transition 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 Harbor Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbor Energy Transition has no effect on the direction of Invesco DB i.e., Invesco DB and Harbor Energy go up and down completely randomly.

Pair Corralation between Invesco DB and Harbor Energy

Considering the 90-day investment horizon Invesco DB Agriculture is expected to under-perform the Harbor Energy. But the etf apears to be less risky and, when comparing its historical volatility, Invesco DB Agriculture is 1.95 times less risky than Harbor Energy. The etf trades about -0.01 of its potential returns per unit of risk. The Harbor Energy Transition is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest  1,257  in Harbor Energy Transition on October 12, 2024 and sell it today you would earn a total of  66.00  from holding Harbor Energy Transition or generate 5.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	40.0%
Values	Daily Returns

Invesco DB Agriculture  vs.  Harbor Energy Transition

Invesco DB Agriculture

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DB Agriculture are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental drivers, Invesco DB may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Harbor Energy Transition

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Harbor Energy Transition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly inconsistent basic indicators, Harbor Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Invesco DB and Harbor Energy

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

The idea behind Invesco DB Agriculture and Harbor Energy Transition 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.