Correlation Between Invesco DB and ProShares

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

By analyzing existing cross correlation between Invesco DB Oil and ProShares K 1 Free, you can compare the effects of market volatilities on Invesco DB and ProShares 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 ProShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco DB and ProShares.

Diversification Opportunities for Invesco DB and ProShares

0.92

Correlation Coefficient

Invesco DB  ProShares

Almost no diversification

The 3 months correlation between Invesco and ProShares is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DB Oil and ProShares K 1 Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares K 1 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 Oil are associated (or correlated) with ProShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares K 1 has no effect on the direction of Invesco DB i.e., Invesco DB and ProShares go up and down completely randomly.

Pair Corralation between Invesco DB and ProShares

Considering the 90-day investment horizon Invesco DB Oil is expected to generate 1.22 times more return on investment than ProShares. However, Invesco DB is 1.22 times more volatile than ProShares K 1 Free. It trades about 0.01 of its potential returns per unit of risk. ProShares K 1 Free is currently generating about 0.0 per unit of risk. If you would invest  1,384  in Invesco DB Oil on December 22, 2024 and sell it today you would earn a total of  3.00  from holding Invesco DB Oil or generate 0.22% return on investment over 90 days.

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

Invesco DB Oil  vs.  ProShares K 1 Free

Invesco DB Oil

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco DB Oil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, Invesco DB is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

ProShares K 1

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares K 1 Free has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, ProShares is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Invesco DB and ProShares

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

The idea behind Invesco DB Oil and ProShares K 1 Free 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.