Correlation Between Invesco Pennsylvania and GAMCO Natural

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

By analyzing existing cross correlation between Invesco Pennsylvania Value and GAMCO Natural Resources, you can compare the effects of market volatilities on Invesco Pennsylvania and GAMCO Natural 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 Pennsylvania with a short position of GAMCO Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Pennsylvania and GAMCO Natural.

Diversification Opportunities for Invesco Pennsylvania and GAMCO Natural

0.41

Correlation Coefficient

Invesco Pennsylvania  GAMCO Natural

Very weak diversification

The 3 months correlation between Invesco and GAMCO is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Pennsylvania Value and GAMCO Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAMCO Natural Resources and Invesco Pennsylvania 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 Pennsylvania Value are associated (or correlated) with GAMCO Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAMCO Natural Resources has no effect on the direction of Invesco Pennsylvania i.e., Invesco Pennsylvania and GAMCO Natural go up and down completely randomly.

Pair Corralation between Invesco Pennsylvania and GAMCO Natural

Considering the 90-day investment horizon Invesco Pennsylvania is expected to generate 1.36 times less return on investment than GAMCO Natural. But when comparing it to its historical volatility, Invesco Pennsylvania Value is 1.57 times less risky than GAMCO Natural. It trades about 0.06 of its potential returns per unit of risk. GAMCO Natural Resources is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  447.00  in GAMCO Natural Resources on September 4, 2024 and sell it today you would earn a total of  136.00  from holding GAMCO Natural Resources or generate 30.43% return on investment over 90 days.

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

Invesco Pennsylvania Value  vs.  GAMCO Natural Resources

Invesco Pennsylvania

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Pennsylvania Value are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Invesco Pennsylvania is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

GAMCO Natural Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GAMCO Natural Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, GAMCO Natural is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Invesco Pennsylvania and GAMCO Natural

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

The idea behind Invesco Pennsylvania Value and GAMCO Natural Resources 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.