Correlation Between Invesco Balanced-risk and Invesco Municipal
Can any of the company-specific risk be diversified away by investing in both Invesco Balanced-risk 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 Invesco Balanced-risk and Invesco Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco Balanced Risk Allocation and Invesco Municipal Income, you can compare the effects of market volatilities on Invesco Balanced-risk 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 Invesco Balanced-risk with a short position of Invesco Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Balanced-risk and Invesco Municipal.
Diversification Opportunities for Invesco Balanced-risk and Invesco Municipal
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Invesco and Invesco is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Balanced Risk Allocati and Invesco Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Municipal Income and Invesco Balanced-risk 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 Balanced Risk Allocation 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 Income has no effect on the direction of Invesco Balanced-risk i.e., Invesco Balanced-risk and Invesco Municipal go up and down completely randomly.
Pair Corralation between Invesco Balanced-risk and Invesco Municipal
Assuming the 90 days horizon Invesco Balanced-risk is expected to generate 1.09 times less return on investment than Invesco Municipal. In addition to that, Invesco Balanced-risk is 1.79 times more volatile than Invesco Municipal Income. It trades about 0.03 of its total potential returns per unit of risk. Invesco Municipal Income is currently generating about 0.06 per unit of volatility. If you would invest 1,103 in Invesco Municipal Income on August 25, 2024 and sell it today you would earn a total of 104.00 from holding Invesco Municipal Income or generate 9.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco Balanced Risk Allocati vs. Invesco Municipal Income
Performance |
| Timeline |
| Invesco Balanced Risk |
| Invesco Municipal Income |
Invesco Balanced-risk and Invesco Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco Balanced-risk and Invesco Municipal
The main advantage of trading using opposite Invesco Balanced-risk and Invesco Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Balanced-risk 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.The idea behind Invesco Balanced Risk Allocation and Invesco Municipal Income 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.
| Invesco Municipal vs. Invesco Municipal Income | Invesco Municipal vs. Oppenheimer Rising Dividends | Invesco Municipal vs. Invesco High Yield | Invesco Municipal vs. Oppenheimer Strategic Income |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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