Correlation Between Invesco Energy and Davenport Equity

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

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

Diversification Opportunities for Invesco Energy and Davenport Equity

0.76

Correlation Coefficient

Invesco Energy  Davenport Equity

Poor diversification

The 3 months correlation between Invesco and Davenport is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Energy Fund and Davenport Equity Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davenport Equity Opp and Invesco Energy 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 Energy Fund are associated (or correlated) with Davenport Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davenport Equity Opp has no effect on the direction of Invesco Energy i.e., Invesco Energy and Davenport Equity go up and down completely randomly.

Pair Corralation between Invesco Energy and Davenport Equity

Assuming the 90 days horizon Invesco Energy is expected to generate 1.58 times less return on investment than Davenport Equity. In addition to that, Invesco Energy is 1.18 times more volatile than Davenport Equity Opportunities. It trades about 0.12 of its total potential returns per unit of risk. Davenport Equity Opportunities is currently generating about 0.23 per unit of volatility. If you would invest  2,346  in Davenport Equity Opportunities on September 4, 2024 and sell it today you would earn a total of  317.00  from holding Davenport Equity Opportunities or generate 13.51% return on investment over 90 days.

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

Invesco Energy Fund  vs.  Davenport Equity Opportunities

Invesco Energy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Energy Fund are ranked lower than 9 (%) 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 January 2025.

Davenport Equity Opp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Davenport Equity Opportunities are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Davenport Equity showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invesco Energy and Davenport Equity

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

The idea behind Invesco Energy Fund and Davenport Equity Opportunities 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.