Correlation Between Invesco and Energy Select

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

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

Diversification Opportunities for Invesco and Energy Select

-0.39

Correlation Coefficient

Invesco  Energy Select

Very good diversification

The 3 months correlation between Invesco and Energy is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Invesco and Energy Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Select Sector and Invesco 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 are associated (or correlated) with Energy Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Select Sector has no effect on the direction of Invesco i.e., Invesco and Energy Select go up and down completely randomly.

Pair Corralation between Invesco and Energy Select

If you would invest  8,586  in Energy Select Sector on September 16, 2024 and sell it today you would earn a total of  336.00  from holding Energy Select Sector or generate 3.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.54%
Values	Daily Returns

Invesco  vs.  Energy Select Sector

Invesco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Invesco is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Energy Select Sector

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Select Sector are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Energy Select is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Invesco and Energy Select

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

The idea behind Invesco and Energy Select Sector 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.