Correlation Between Energy Select and Invesco

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

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

Diversification Opportunities for Energy Select and Invesco

0.0

Correlation Coefficient

Energy Select  Invesco

Pay attention - limited upside

The 3 months correlation between Energy and Invesco is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Energy Select Sector and Invesco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco and Energy Select 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 Energy Select Sector are associated (or correlated) with Invesco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco has no effect on the direction of Energy Select i.e., Energy Select and Invesco go up and down completely randomly.

Pair Corralation between Energy Select and Invesco

If you would invest  8,391  in Energy Select Sector on December 27, 2024 and sell it today you would earn a total of  987.00  from holding Energy Select Sector or generate 11.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Energy Select Sector  vs.  Invesco

Energy Select Sector

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Select Sector are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, Energy Select may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Invesco

Risk-Adjusted Performance

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Energy Select and Invesco

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

The idea behind Energy Select Sector and Invesco 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.