Correlation Between Invesco DB and ETRACS Bloomberg

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

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

Diversification Opportunities for Invesco DB and ETRACS Bloomberg

0.72

Correlation Coefficient

Invesco DB  ETRACS Bloomberg

Poor diversification

The 3 months correlation between Invesco and ETRACS is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DB Commodity and ETRACS Bloomberg Commodity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS Bloomberg Com and Invesco DB 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 DB Commodity are associated (or correlated) with ETRACS Bloomberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS Bloomberg Com has no effect on the direction of Invesco DB i.e., Invesco DB and ETRACS Bloomberg go up and down completely randomly.

Pair Corralation between Invesco DB and ETRACS Bloomberg

Considering the 90-day investment horizon Invesco DB Commodity is expected to under-perform the ETRACS Bloomberg. But the etf apears to be less risky and, when comparing its historical volatility, Invesco DB Commodity is 2.91 times less risky than ETRACS Bloomberg. The etf trades about -0.17 of its potential returns per unit of risk. The ETRACS Bloomberg Commodity is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,062  in ETRACS Bloomberg Commodity on September 4, 2024 and sell it today you would lose (38.00) from holding ETRACS Bloomberg Commodity or give up 1.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Invesco DB Commodity  vs.  ETRACS Bloomberg Commodity

Invesco DB Commodity

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DB Commodity are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Invesco DB is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

ETRACS Bloomberg Com

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ETRACS Bloomberg Commodity are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, ETRACS Bloomberg is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invesco DB and ETRACS Bloomberg

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

The idea behind Invesco DB Commodity and ETRACS Bloomberg Commodity 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.