Correlation Between Invesco DB and USCF ETF

Can any of the company-specific risk be diversified away by investing in both Invesco DB and USCF ETF 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 USCF ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Invesco DB Commodity and USCF ETF Trust, you can compare the effects of market volatilities on Invesco DB and USCF ETF 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 USCF ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco DB and USCF ETF.

Diversification Opportunities for Invesco DB and USCF ETF

0.53

Correlation Coefficient

Invesco DB  USCF ETF

Very weak diversification

The 3 months correlation between Invesco and USCF is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DB Commodity and USCF ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USCF ETF Trust 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 Commodity are associated (or correlated) with USCF ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USCF ETF Trust has no effect on the direction of Invesco DB i.e., Invesco DB and USCF ETF go up and down completely randomly.

Pair Corralation between Invesco DB and USCF ETF

Considering the 90-day investment horizon Invesco DB Commodity is expected to generate 1.23 times more return on investment than USCF ETF. However, Invesco DB is 1.23 times more volatile than USCF ETF Trust. It trades about 0.12 of its potential returns per unit of risk. USCF ETF Trust is currently generating about -0.07 per unit of risk. If you would invest  2,087  in Invesco DB Commodity on December 1, 2024 and sell it today you would earn a total of  113.00  from holding Invesco DB Commodity or generate 5.41% return on investment over 90 days.

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

Invesco DB Commodity  vs.  USCF ETF Trust

Invesco DB Commodity

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DB Commodity are ranked lower than 9 (%) 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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

USCF ETF Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days USCF ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, USCF ETF is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Invesco DB and USCF ETF

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

The idea behind Invesco DB Commodity and USCF ETF Trust 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.