Correlation Between United States and Invesco DB

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

By analyzing existing cross correlation between United States 12 and Invesco DB Oil, you can compare the effects of market volatilities on United States and Invesco DB 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 United States with a short position of Invesco DB. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Invesco DB.

Diversification Opportunities for United States and Invesco DB

0.98

Correlation Coefficient

United States  Invesco DB

Almost no diversification

The 3 months correlation between United and Invesco is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding United States 12 and Invesco DB Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DB Oil and United States 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 United States 12 are associated (or correlated) with Invesco DB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DB Oil has no effect on the direction of United States i.e., United States and Invesco DB go up and down completely randomly.

Pair Corralation between United States and Invesco DB

Considering the 90-day investment horizon United States is expected to generate 2.05 times less return on investment than Invesco DB. But when comparing it to its historical volatility, United States 12 is 1.27 times less risky than Invesco DB. It trades about 0.0 of its potential returns per unit of risk. Invesco DB Oil is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,415  in Invesco DB Oil on December 28, 2024 and sell it today you would lose (2.00) from holding Invesco DB Oil or give up 0.14% of portfolio value over 90 days.

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

United States 12  vs.  Invesco DB Oil

United States 12

Risk-Adjusted Performance

Very Weak

Over the last 90 days United States 12 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, United States is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Invesco DB Oil

Risk-Adjusted Performance

Weak

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

Pair Trading with United States and Invesco DB

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

The idea behind United States 12 and Invesco DB 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.