Correlation Between Invesco Dynamic and ProShares UltraShort

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

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

Diversification Opportunities for Invesco Dynamic and ProShares UltraShort

-0.99

Correlation Coefficient

Invesco Dynamic  ProShares UltraShort

Pay attention - limited upside

The 3 months correlation between Invesco and ProShares is -0.99. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Dynamic Energy and ProShares UltraShort Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort Oil and Invesco Dynamic 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 Dynamic Energy are associated (or correlated) with ProShares UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort Oil has no effect on the direction of Invesco Dynamic i.e., Invesco Dynamic and ProShares UltraShort go up and down completely randomly.

Pair Corralation between Invesco Dynamic and ProShares UltraShort

Considering the 90-day investment horizon Invesco Dynamic Energy is expected to under-perform the ProShares UltraShort. But the etf apears to be less risky and, when comparing its historical volatility, Invesco Dynamic Energy is 1.49 times less risky than ProShares UltraShort. The etf trades about -0.31 of its potential returns per unit of risk. The ProShares UltraShort Oil is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  844.00  in ProShares UltraShort Oil on February 5, 2024 and sell it today you would earn a total of  109.00  from holding ProShares UltraShort Oil or generate 12.91% return on investment over 90 days.

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

Invesco Dynamic Energy  vs.  ProShares UltraShort Oil

Invesco Dynamic Energy

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Dynamic Energy are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Invesco Dynamic exhibited solid returns over the last few months and may actually be approaching a breakup point.

ProShares UltraShort Oil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares UltraShort Oil has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Etf's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the Exchange Traded Fund stockholders.

Pair Trading with Invesco Dynamic and ProShares UltraShort

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

The idea behind Invesco Dynamic Energy and ProShares UltraShort Oil 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .