Correlation Between WisdomTree and Invesco Municipal
Can any of the company-specific risk be diversified away by investing in both WisdomTree and Invesco Municipal 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 WisdomTree and Invesco Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree SP 500 and Invesco Municipal Bond, you can compare the effects of market volatilities on WisdomTree and Invesco Municipal 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 WisdomTree with a short position of Invesco Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree and Invesco Municipal.
Diversification Opportunities for WisdomTree and Invesco Municipal
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between WisdomTree and Invesco is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree SP 500 and Invesco Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Municipal Bond and WisdomTree 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 WisdomTree SP 500 are associated (or correlated) with Invesco Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Municipal Bond has no effect on the direction of WisdomTree i.e., WisdomTree and Invesco Municipal go up and down completely randomly.
Pair Corralation between WisdomTree and Invesco Municipal
Assuming the 90 days trading horizon WisdomTree SP 500 is expected to under-perform the Invesco Municipal. In addition to that, WisdomTree is 5.62 times more volatile than Invesco Municipal Bond. It trades about -0.05 of its total potential returns per unit of risk. Invesco Municipal Bond is currently generating about 0.26 per unit of volatility. If you would invest 249,150 in Invesco Municipal Bond on August 25, 2024 and sell it today you would earn a total of 7,375 from holding Invesco Municipal Bond or generate 2.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree SP 500 vs. Invesco Municipal Bond
Performance |
| Timeline |
| WisdomTree SP 500 |
| Invesco Municipal Bond |
WisdomTree and Invesco Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree and Invesco Municipal
The main advantage of trading using opposite WisdomTree and Invesco Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree position performs unexpectedly, Invesco Municipal 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 Municipal will offset losses from the drop in Invesco Municipal's long position.| WisdomTree vs. Leverage Shares 3x | WisdomTree vs. WisdomTree Silver 3x | WisdomTree vs. Leverage Shares 3x | WisdomTree vs. GraniteShares FAANG ETC |
| Invesco Municipal vs. Leverage Shares 3x | Invesco Municipal vs. WisdomTree SP 500 | Invesco Municipal vs. WisdomTree Silver 3x | Invesco Municipal vs. Leverage Shares 3x |
Check out your portfolio center.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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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