Correlation Between High Yield and Invesco SP
Can any of the company-specific risk be diversified away by investing in both High Yield and Invesco SP 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 High Yield and Invesco SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between High Yield Municipal Fund and Invesco SP 500, you can compare the effects of market volatilities on High Yield and Invesco SP 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 High Yield with a short position of Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Yield and Invesco SP.
Diversification Opportunities for High Yield and Invesco SP
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between High and Invesco is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 500 and High Yield 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 High Yield Municipal Fund are associated (or correlated) with Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP 500 has no effect on the direction of High Yield i.e., High Yield and Invesco SP go up and down completely randomly.
Pair Corralation between High Yield and Invesco SP
Assuming the 90 days horizon High Yield Municipal Fund is expected to generate 0.41 times more return on investment than Invesco SP. However, High Yield Municipal Fund is 2.45 times less risky than Invesco SP. It trades about 0.09 of its potential returns per unit of risk. Invesco SP 500 is currently generating about -0.01 per unit of risk. If you would invest 825.00 in High Yield Municipal Fund on September 12, 2024 and sell it today you would earn a total of 80.00 from holding High Yield Municipal Fund or generate 9.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
High Yield Municipal Fund vs. Invesco SP 500
Performance |
| Timeline |
| High Yield Municipal |
| Invesco SP 500 |
High Yield and Invesco SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with High Yield and Invesco SP
The main advantage of trading using opposite High Yield and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High Yield position performs unexpectedly, Invesco SP 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 SP will offset losses from the drop in Invesco SP's long position.| High Yield vs. High Yield Fund Investor | High Yield vs. Intermediate Term Tax Free Bond | High Yield vs. California High Yield Municipal | High Yield vs. T Rowe Price |
| Invesco SP vs. Invesco SP 500 | Invesco SP vs. Invesco SP 500 | Invesco SP vs. Aquagold International | Invesco SP vs. Morningstar Unconstrained Allocation |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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