Correlation Between Invesco Steelpath and Inverse Government

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

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

Diversification Opportunities for Invesco Steelpath and Inverse Government

0.45

Correlation Coefficient

Invesco Steelpath  Inverse Government

Very weak diversification

The 3 months correlation between Invesco and Inverse is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Steelpath Mlp and Inverse Government Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Government Long and Invesco Steelpath 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 Steelpath Mlp are associated (or correlated) with Inverse Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Government Long has no effect on the direction of Invesco Steelpath i.e., Invesco Steelpath and Inverse Government go up and down completely randomly.

Pair Corralation between Invesco Steelpath and Inverse Government

Assuming the 90 days horizon Invesco Steelpath is expected to generate 1.08 times less return on investment than Inverse Government. In addition to that, Invesco Steelpath is 1.01 times more volatile than Inverse Government Long. It trades about 0.18 of its total potential returns per unit of risk. Inverse Government Long is currently generating about 0.2 per unit of volatility. If you would invest  16,431  in Inverse Government Long on October 24, 2024 and sell it today you would earn a total of  2,320  from holding Inverse Government Long or generate 14.12% return on investment over 90 days.

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

Invesco Steelpath Mlp  vs.  Inverse Government Long

Invesco Steelpath Mlp

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Steelpath Mlp are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Invesco Steelpath showed solid returns over the last few months and may actually be approaching a breakup point.

Inverse Government Long

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inverse Government Long are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Inverse Government may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Invesco Steelpath and Inverse Government

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

The idea behind Invesco Steelpath Mlp and Inverse Government Long 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.