Correlation Between Invesco Physical and DB Physical

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

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

Diversification Opportunities for Invesco Physical and DB Physical

0.84

Correlation Coefficient

Invesco Physical  DB Physical

Very poor diversification

The 3 months correlation between Invesco and XGLS is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Physical Gold and DB Physical Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DB Physical Gold and Invesco Physical 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 Physical Gold are associated (or correlated) with DB Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DB Physical Gold has no effect on the direction of Invesco Physical i.e., Invesco Physical and DB Physical go up and down completely randomly.

Pair Corralation between Invesco Physical and DB Physical

Assuming the 90 days trading horizon Invesco Physical Gold is expected to generate 0.97 times more return on investment than DB Physical. However, Invesco Physical Gold is 1.03 times less risky than DB Physical. It trades about 0.17 of its potential returns per unit of risk. DB Physical Gold is currently generating about 0.09 per unit of risk. If you would invest  1,838,300  in Invesco Physical Gold on August 30, 2024 and sell it today you would earn a total of  177,900  from holding Invesco Physical Gold or generate 9.68% return on investment over 90 days.

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

Invesco Physical Gold  vs.  DB Physical Gold

Invesco Physical Gold

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Physical Gold are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Invesco Physical may actually be approaching a critical reversion point that can send shares even higher in December 2024.

DB Physical Gold

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DB Physical Gold are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, DB Physical is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Invesco Physical and DB Physical

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

The idea behind Invesco Physical Gold and DB Physical Gold 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.