Correlation Between Invesco DB and Invesco CurrencyShares

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

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

Diversification Opportunities for Invesco DB and Invesco CurrencyShares

0.08

Correlation Coefficient

Invesco DB  Invesco CurrencyShares

Significant diversification

The 3 months correlation between Invesco and Invesco is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DB Multi Sector and Invesco CurrencyShares Euro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco CurrencyShares 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 Multi Sector are associated (or correlated) with Invesco CurrencyShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco CurrencyShares has no effect on the direction of Invesco DB i.e., Invesco DB and Invesco CurrencyShares go up and down completely randomly.

Pair Corralation between Invesco DB and Invesco CurrencyShares

If you would invest  194,271  in Invesco CurrencyShares Euro on December 30, 2024 and sell it today you would earn a total of  9,810  from holding Invesco CurrencyShares Euro or generate 5.05% return on investment over 90 days.

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

Invesco DB Multi Sector  vs.  Invesco CurrencyShares Euro

Invesco DB Multi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco DB Multi Sector has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Invesco DB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco CurrencyShares

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco CurrencyShares Euro are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Invesco CurrencyShares is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invesco DB and Invesco CurrencyShares

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

The idea behind Invesco DB Multi Sector and Invesco CurrencyShares Euro 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.