Correlation Between Invesco Energy and Hennessy Gas

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

By analyzing existing cross correlation between Invesco Energy Fund and Hennessy Gas Utility, you can compare the effects of market volatilities on Invesco Energy and Hennessy Gas 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 Energy with a short position of Hennessy Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Energy and Hennessy Gas.

Diversification Opportunities for Invesco Energy and Hennessy Gas

0.83

Correlation Coefficient

Invesco Energy  Hennessy Gas

Very poor diversification

The 3 months correlation between Invesco and Hennessy is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Energy Fund and Hennessy Gas Utility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Gas Utility and Invesco Energy 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 Energy Fund are associated (or correlated) with Hennessy Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Gas Utility has no effect on the direction of Invesco Energy i.e., Invesco Energy and Hennessy Gas go up and down completely randomly.

Pair Corralation between Invesco Energy and Hennessy Gas

Assuming the 90 days horizon Invesco Energy Fund is expected to generate 1.08 times more return on investment than Hennessy Gas. However, Invesco Energy is 1.08 times more volatile than Hennessy Gas Utility. It trades about 0.13 of its potential returns per unit of risk. Hennessy Gas Utility is currently generating about 0.06 per unit of risk. If you would invest  2,827  in Invesco Energy Fund on September 11, 2024 and sell it today you would earn a total of  252.00  from holding Invesco Energy Fund or generate 8.91% return on investment over 90 days.

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

Invesco Energy Fund  vs.  Hennessy Gas Utility

Invesco Energy

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Energy Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Invesco Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hennessy Gas Utility

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Gas Utility are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Hennessy Gas 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 Energy and Hennessy Gas

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

The idea behind Invesco Energy Fund and Hennessy Gas Utility 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..