Correlation Between Invesco DB and Barclays Capital

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

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

Diversification Opportunities for Invesco DB and Barclays Capital

0.34

Correlation Coefficient

Invesco DB  Barclays Capital

Weak diversification

The 3 months correlation between Invesco and Barclays is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DB Precious and Barclays Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barclays Capital 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 Precious are associated (or correlated) with Barclays Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barclays Capital has no effect on the direction of Invesco DB i.e., Invesco DB and Barclays Capital go up and down completely randomly.

Pair Corralation between Invesco DB and Barclays Capital

Considering the 90-day investment horizon Invesco DB Precious is expected to generate 1.28 times more return on investment than Barclays Capital. However, Invesco DB is 1.28 times more volatile than Barclays Capital. It trades about 0.06 of its potential returns per unit of risk. Barclays Capital is currently generating about -0.01 per unit of risk. If you would invest  4,597  in Invesco DB Precious on October 11, 2024 and sell it today you would earn a total of  1,584  from holding Invesco DB Precious or generate 34.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	25.66%
Values	Daily Returns

Invesco DB Precious  vs.  Barclays Capital

Invesco DB Precious

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco DB Precious has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Invesco DB is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Barclays Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barclays Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking indicators, Barclays Capital 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 Barclays Capital

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

The idea behind Invesco DB Precious and Barclays Capital 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 Anywhere module to track or share privately all of your investments from the convenience of any device.