Correlation Between IShares Oil and Invesco Dynamic

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

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

Diversification Opportunities for IShares Oil and Invesco Dynamic

0.75

Correlation Coefficient

IShares Oil  Invesco Dynamic

Poor diversification

The 3 months correlation between IShares and Invesco is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding iShares Oil Gas and Invesco Dynamic Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Dynamic Oil and IShares Oil 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 iShares Oil Gas are associated (or correlated) with Invesco Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Dynamic Oil has no effect on the direction of IShares Oil i.e., IShares Oil and Invesco Dynamic go up and down completely randomly.

Pair Corralation between IShares Oil and Invesco Dynamic

Considering the 90-day investment horizon iShares Oil Gas is expected to generate 0.78 times more return on investment than Invesco Dynamic. However, iShares Oil Gas is 1.29 times less risky than Invesco Dynamic. It trades about 0.01 of its potential returns per unit of risk. Invesco Dynamic Oil is currently generating about -0.02 per unit of risk. If you would invest  9,158  in iShares Oil Gas on September 17, 2024 and sell it today you would lose (6.00) from holding iShares Oil Gas or give up 0.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

iShares Oil Gas  vs.  Invesco Dynamic Oil

iShares Oil Gas

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days iShares Oil Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, IShares Oil is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Invesco Dynamic Oil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Dynamic Oil has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Invesco Dynamic is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with IShares Oil and Invesco Dynamic

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

The idea behind iShares Oil Gas and Invesco Dynamic Oil 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.