Correlation Between The National and Invesco Emerging
Can any of the company-specific risk be diversified away by investing in both The National and Invesco Emerging 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 The National and Invesco Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The National Tax Free and Invesco Emerging Markets, you can compare the effects of market volatilities on The National and Invesco Emerging 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 The National with a short position of Invesco Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of The National and Invesco Emerging.
Diversification Opportunities for The National and Invesco Emerging
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between The and Invesco is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding The National Tax Free and Invesco Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Emerging Markets and The National 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 The National Tax Free are associated (or correlated) with Invesco Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Emerging Markets has no effect on the direction of The National i.e., The National and Invesco Emerging go up and down completely randomly.
Pair Corralation between The National and Invesco Emerging
Assuming the 90 days horizon The National Tax Free is expected to generate 0.54 times more return on investment than Invesco Emerging. However, The National Tax Free is 1.86 times less risky than Invesco Emerging. It trades about 0.21 of its potential returns per unit of risk. Invesco Emerging Markets is currently generating about -0.05 per unit of risk. If you would invest 1,857 in The National Tax Free on September 1, 2024 and sell it today you would earn a total of 21.00 from holding The National Tax Free or generate 1.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
The National Tax Free vs. Invesco Emerging Markets
Performance |
| Timeline |
| National Tax |
| Invesco Emerging Markets |
The National and Invesco Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with The National and Invesco Emerging
The main advantage of trading using opposite The National and Invesco Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The National position performs unexpectedly, Invesco Emerging 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 Emerging will offset losses from the drop in Invesco Emerging's long position.| The National vs. The Missouri Tax Free | The National vs. The Bond Fund | The National vs. High Yield Municipal Fund | The National vs. Fidelity Intermediate Municipal |
| Invesco Emerging vs. Invesco Municipal Income | Invesco Emerging vs. Invesco Municipal Income | Invesco Emerging vs. Invesco Municipal Income | Invesco Emerging vs. Oppenheimer Rising Dividends |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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