Correlation Between Invesco Energy and Adams Natural

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

Diversification Opportunities for Invesco Energy and Adams Natural

0.97

Correlation Coefficient

Invesco Energy  Adams Natural

Almost no diversification

The 3 months correlation between Invesco and Adams is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Energy Fund and Adams Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adams Natural Resources 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 Adams Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adams Natural Resources has no effect on the direction of Invesco Energy i.e., Invesco Energy and Adams Natural go up and down completely randomly.

Pair Corralation between Invesco Energy and Adams Natural

Assuming the 90 days horizon Invesco Energy Fund is expected to generate 0.93 times more return on investment than Adams Natural. However, Invesco Energy Fund is 1.07 times less risky than Adams Natural. It trades about 0.13 of its potential returns per unit of risk. Adams Natural Resources is currently generating about 0.11 per unit of risk. If you would invest  2,315  in Invesco Energy Fund on December 28, 2024 and sell it today you would earn a total of  204.00  from holding Invesco Energy Fund or generate 8.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Invesco Energy Fund  vs.  Adams Natural Resources

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 10 (%) 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.

Adams Natural Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adams Natural Resources are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of very fragile technical and fundamental indicators, Adams Natural may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Invesco Energy and Adams Natural

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

The idea behind Invesco Energy Fund and Adams Natural Resources 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.