Correlation Between FT Cboe and Invesco DB

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

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

Diversification Opportunities for FT Cboe and Invesco DB

-0.86

Correlation Coefficient

FT Cboe  Invesco DB

Pay attention - limited upside

The 3 months correlation between DSEP and Invesco is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding FT Cboe Vest and Invesco DB Dollar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DB Dollar and FT Cboe 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 FT Cboe Vest 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 Dollar has no effect on the direction of FT Cboe i.e., FT Cboe and Invesco DB go up and down completely randomly.

Pair Corralation between FT Cboe and Invesco DB

Given the investment horizon of 90 days FT Cboe Vest is expected to generate 0.49 times more return on investment than Invesco DB. However, FT Cboe Vest is 2.06 times less risky than Invesco DB. It trades about 0.39 of its potential returns per unit of risk. Invesco DB Dollar is currently generating about -0.17 per unit of risk. If you would invest  3,989  in FT Cboe Vest on September 5, 2024 and sell it today you would earn a total of  105.00  from holding FT Cboe Vest or generate 2.63% return on investment over 90 days.

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

FT Cboe Vest  vs.  Invesco DB Dollar

FT Cboe Vest

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FT Cboe Vest are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, FT Cboe is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Invesco DB Dollar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco DB Dollar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, 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 FT Cboe and Invesco DB

The main advantage of trading using opposite FT Cboe and Invesco DB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FT Cboe 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 FT Cboe Vest and Invesco DB Dollar 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.