Correlation Between World Energy and Invesco Municipal
Can any of the company-specific risk be diversified away by investing in both World Energy 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 World Energy and Invesco Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between World Energy Fund and Invesco Municipal Income, you can compare the effects of market volatilities on World Energy 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 World Energy with a short position of Invesco Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Energy and Invesco Municipal.
Diversification Opportunities for World Energy and Invesco Municipal
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between World and Invesco is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding World Energy Fund 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 World Energy 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 World Energy Fund 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 World Energy i.e., World Energy and Invesco Municipal go up and down completely randomly.
Pair Corralation between World Energy and Invesco Municipal
Assuming the 90 days horizon World Energy Fund is expected to generate 8.46 times more return on investment than Invesco Municipal. However, World Energy is 8.46 times more volatile than Invesco Municipal Income. It trades about 0.09 of its potential returns per unit of risk. Invesco Municipal Income is currently generating about -0.03 per unit of risk. If you would invest 1,449 in World Energy Fund on November 1, 2024 and sell it today you would earn a total of 45.00 from holding World Energy Fund or generate 3.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
World Energy Fund vs. Invesco Municipal Income
Performance |
| Timeline |
| World Energy |
| Invesco Municipal Income |
World Energy and Invesco Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with World Energy and Invesco Municipal
The main advantage of trading using opposite World Energy and Invesco Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Energy 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.| World Energy vs. Barings High Yield | World Energy vs. Old Westbury Fixed | World Energy vs. Ab Bond Inflation | World Energy vs. Ab Bond Inflation |
| Invesco Municipal vs. World Energy Fund | Invesco Municipal vs. Fidelity Advisor Energy | Invesco Municipal vs. Payden Rygel Investment | Invesco Municipal vs. Oil Gas Ultrasector |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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