Correlation Between Invesco Energy and Nationwide Small

Can any of the company-specific risk be diversified away by investing in both Invesco Energy and Nationwide Small 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 Nationwide Small 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 Nationwide Small Cap, you can compare the effects of market volatilities on Invesco Energy and Nationwide Small 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 Nationwide Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Energy and Nationwide Small.

Diversification Opportunities for Invesco Energy and Nationwide Small

0.09

Correlation Coefficient

Invesco Energy  Nationwide Small

Significant diversification

The 3 months correlation between Invesco and Nationwide is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Energy Fund and Nationwide Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Small Cap 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 Nationwide Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Small Cap has no effect on the direction of Invesco Energy i.e., Invesco Energy and Nationwide Small go up and down completely randomly.

Pair Corralation between Invesco Energy and Nationwide Small

Assuming the 90 days horizon Invesco Energy Fund is expected to generate 0.92 times more return on investment than Nationwide Small. However, Invesco Energy Fund is 1.08 times less risky than Nationwide Small. It trades about 0.14 of its potential returns per unit of risk. Nationwide Small Cap is currently generating about -0.11 per unit of risk. If you would invest  2,293  in Invesco Energy Fund on December 22, 2024 and sell it today you would earn a total of  212.00  from holding Invesco Energy Fund or generate 9.25% return on investment over 90 days.

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

Invesco Energy Fund  vs.  Nationwide Small Cap

Invesco Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Energy Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Invesco Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Nationwide Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nationwide Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Invesco Energy and Nationwide Small

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

The idea behind Invesco Energy Fund and Nationwide Small Cap 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.