Correlation Between Energy Services and Invesco Small
Can any of the company-specific risk be diversified away by investing in both Energy Services and Invesco Small 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 Services and Invesco Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Services Fund and Invesco Small Cap, you can compare the effects of market volatilities on Energy Services and Invesco Small 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 Services with a short position of Invesco Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Services and Invesco Small.
Diversification Opportunities for Energy Services and Invesco Small
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ENERGY and Invesco is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Energy Services Fund and Invesco Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Small Cap and Energy Services 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 Services Fund are associated (or correlated) with Invesco Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Small Cap has no effect on the direction of Energy Services i.e., Energy Services and Invesco Small go up and down completely randomly.
Pair Corralation between Energy Services and Invesco Small
Assuming the 90 days horizon Energy Services is expected to generate 1.04 times less return on investment than Invesco Small. In addition to that, Energy Services is 1.5 times more volatile than Invesco Small Cap. It trades about 0.22 of its total potential returns per unit of risk. Invesco Small Cap is currently generating about 0.35 per unit of volatility. If you would invest 1,332 in Invesco Small Cap on September 1, 2024 and sell it today you would earn a total of 166.00 from holding Invesco Small Cap or generate 12.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Energy Services Fund vs. Invesco Small Cap
Performance |
| Timeline |
| Energy Services |
| Invesco Small Cap |
Energy Services and Invesco Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Services and Invesco Small
The main advantage of trading using opposite Energy Services and Invesco Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Services position performs unexpectedly, Invesco Small 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 Small will offset losses from the drop in Invesco Small's long position.| Energy Services vs. Basic Materials Fund | Energy Services vs. Electronics Fund Investor | Energy Services vs. Health Care Fund | Energy Services vs. Precious Metals Fund |
| Invesco Small vs. Energy Services Fund | Invesco Small vs. Fidelity Advisor Energy | Invesco Small vs. Short Oil Gas | Invesco Small vs. Calvert Global Energy |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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