Correlation Between DTF Tax and Invesco Quality
Can any of the company-specific risk be diversified away by investing in both DTF Tax and Invesco Quality 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 DTF Tax and Invesco Quality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DTF Tax Free and Invesco Quality Municipal, you can compare the effects of market volatilities on DTF Tax and Invesco Quality 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 DTF Tax with a short position of Invesco Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of DTF Tax and Invesco Quality.
Diversification Opportunities for DTF Tax and Invesco Quality
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between DTF and Invesco is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding DTF Tax Free and Invesco Quality Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Quality Municipal and DTF Tax 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 DTF Tax Free are associated (or correlated) with Invesco Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Quality Municipal has no effect on the direction of DTF Tax i.e., DTF Tax and Invesco Quality go up and down completely randomly.
Pair Corralation between DTF Tax and Invesco Quality
Considering the 90-day investment horizon DTF Tax Free is expected to generate 0.74 times more return on investment than Invesco Quality. However, DTF Tax Free is 1.35 times less risky than Invesco Quality. It trades about 0.01 of its potential returns per unit of risk. Invesco Quality Municipal is currently generating about -0.04 per unit of risk. If you would invest 1,120 in DTF Tax Free on October 22, 2024 and sell it today you would earn a total of 2.00 from holding DTF Tax Free or generate 0.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DTF Tax Free vs. Invesco Quality Municipal
Performance |
| Timeline |
| DTF Tax Free |
| Invesco Quality Municipal |
DTF Tax and Invesco Quality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DTF Tax and Invesco Quality
The main advantage of trading using opposite DTF Tax and Invesco Quality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DTF Tax position performs unexpectedly, Invesco Quality 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 Quality will offset losses from the drop in Invesco Quality's long position.| DTF Tax vs. MFS Investment Grade | DTF Tax vs. Eaton Vance National | DTF Tax vs. MFS High Yield | DTF Tax vs. MFS Municipal Income |
| Invesco Quality vs. MFS Municipal Income | Invesco Quality vs. Blackrock Muniyield | Invesco Quality vs. MFS High Income | Invesco Quality vs. MFS High Yield |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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