Correlation Between Invesco DB and T Rex

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

By analyzing existing cross correlation between Invesco DB Dollar and T Rex 2X Inverse, you can compare the effects of market volatilities on Invesco DB and T Rex 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 T Rex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco DB and T Rex.

Diversification Opportunities for Invesco DB and T Rex

-0.36

Correlation Coefficient

Invesco DB  T Rex

Very good diversification

The 3 months correlation between Invesco and ETQ is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DB Dollar and T Rex 2X Inverse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Rex 2X 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 Dollar are associated (or correlated) with T Rex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Rex 2X has no effect on the direction of Invesco DB i.e., Invesco DB and T Rex go up and down completely randomly.

Pair Corralation between Invesco DB and T Rex

Considering the 90-day investment horizon Invesco DB Dollar is expected to generate 0.04 times more return on investment than T Rex. However, Invesco DB Dollar is 22.87 times less risky than T Rex. It trades about -0.14 of its potential returns per unit of risk. T Rex 2X Inverse is currently generating about -0.28 per unit of risk. If you would invest  1,872  in Invesco DB Dollar on September 3, 2024 and sell it today you would lose (77.00) from holding Invesco DB Dollar or give up 4.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	42.19%
Values	Daily Returns

Invesco DB Dollar  vs.  T Rex 2X Inverse

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.

T Rex 2X

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days T Rex 2X Inverse has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Etf's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

Pair Trading with Invesco DB and T Rex

The main advantage of trading using opposite Invesco DB and T Rex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco DB position performs unexpectedly, T Rex 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 T Rex will offset losses from the drop in T Rex's long position.

The idea behind Invesco DB Dollar and T Rex 2X Inverse 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 Global Correlations module to find global opportunities by holding instruments from different markets.