Correlation Between Gamco Natural and Invesco Energy

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

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

Diversification Opportunities for Gamco Natural and Invesco Energy

0.7

Correlation Coefficient

Gamco Natural  Invesco Energy

Poor diversification

The 3 months correlation between Gamco and Invesco is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Gamco Natural Resources and Invesco Energy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Energy and Gamco Natural 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 Gamco Natural Resources are associated (or correlated) with Invesco Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Energy has no effect on the direction of Gamco Natural i.e., Gamco Natural and Invesco Energy go up and down completely randomly.

Pair Corralation between Gamco Natural and Invesco Energy

Assuming the 90 days horizon Gamco Natural Resources is expected to generate 0.55 times more return on investment than Invesco Energy. However, Gamco Natural Resources is 1.82 times less risky than Invesco Energy. It trades about 0.32 of its potential returns per unit of risk. Invesco Energy Fund is currently generating about 0.13 per unit of risk. If you would invest  597.00  in Gamco Natural Resources on December 29, 2024 and sell it today you would earn a total of  75.00  from holding Gamco Natural Resources or generate 12.56% return on investment over 90 days.

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

Gamco Natural Resources  vs.  Invesco Energy Fund

Gamco Natural Resources

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gamco Natural Resources are ranked lower than 25 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Gamco Natural may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Invesco Energy

Risk-Adjusted Performance

OK

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

Pair Trading with Gamco Natural and Invesco Energy

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

The idea behind Gamco Natural Resources and Invesco Energy Fund 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.

Check out your portfolio center.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.