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 Oil and United States Gasoline, 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

0.92

Correlation Coefficient

Invesco DB  United States

Almost no diversification

The 3 months correlation between Invesco and United is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DB Oil and United States Gasoline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Gasoline 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 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 Gasoline 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 2.87 times less return on investment than United States. In addition to that, Invesco DB is 1.08 times more volatile than United States Gasoline. It trades about 0.01 of its total potential returns per unit of risk. United States Gasoline is currently generating about 0.02 per unit of volatility. If you would invest  6,248  in United States Gasoline on December 28, 2024 and sell it today you would earn a total of  56.00  from holding United States Gasoline or generate 0.9% 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.  United States Gasoline

Invesco DB Oil

Risk-Adjusted Performance

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.

United States Gasoline

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United States Gasoline are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, United States is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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 Oil and United States Gasoline 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 CEOs Directory module to screen CEOs from public companies around the world.