Correlation Between Us Government and Invesco Municipal
Can any of the company-specific risk be diversified away by investing in both Us Government 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 Us Government and Invesco Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Us Government Securities and Invesco Municipal Income, you can compare the effects of market volatilities on Us Government 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 Us Government with a short position of Invesco Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Government and Invesco Municipal.
Diversification Opportunities for Us Government and Invesco Municipal
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CGTAX and Invesco is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Securities 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 Us Government 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 Us Government Securities 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 Us Government i.e., Us Government and Invesco Municipal go up and down completely randomly.
Pair Corralation between Us Government and Invesco Municipal
Assuming the 90 days horizon Us Government Securities is expected to under-perform the Invesco Municipal. In addition to that, Us Government is 1.06 times more volatile than Invesco Municipal Income. It trades about -0.19 of its total potential returns per unit of risk. Invesco Municipal Income is currently generating about -0.02 per unit of volatility. If you would invest 1,217 in Invesco Municipal Income on August 30, 2024 and sell it today you would lose (3.00) from holding Invesco Municipal Income or give up 0.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Us Government Securities vs. Invesco Municipal Income
Performance |
| Timeline |
| Us Government Securities |
| Invesco Municipal Income |
Us Government and Invesco Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Us Government and Invesco Municipal
The main advantage of trading using opposite Us Government and Invesco Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Government 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.| Us Government vs. Ab Discovery Value | Us Government vs. Mutual Of America | Us Government vs. Lord Abbett Small | Us Government vs. Amg River Road |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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