Correlation Between Ford and Invesco Municipal
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Invesco Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Invesco Municipal Bond, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Invesco Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Invesco Municipal.
Diversification Opportunities for Ford and Invesco Municipal
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ford and Invesco is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Invesco Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Municipal Bond and Ford 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 Ford Motor 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 Bond has no effect on the direction of Ford i.e., Ford and Invesco Municipal go up and down completely randomly.
Pair Corralation between Ford and Invesco Municipal
Taking into account the 90-day investment horizon Ford Motor is expected to generate 4.04 times more return on investment than Invesco Municipal. However, Ford is 4.04 times more volatile than Invesco Municipal Bond. It trades about 0.05 of its potential returns per unit of risk. Invesco Municipal Bond is currently generating about 0.15 per unit of risk. If you would invest 1,072 in Ford Motor on August 25, 2024 and sell it today you would earn a total of 46.00 from holding Ford Motor or generate 4.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Invesco Municipal Bond
Performance |
| Timeline |
| Ford Motor |
| Invesco Municipal Bond |
Ford and Invesco Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Invesco Municipal
The main advantage of trading using opposite Ford and Invesco Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor and Invesco Municipal Bond 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. Leverage Shares 3x | Invesco Municipal vs. WisdomTree SP 500 | Invesco Municipal vs. WisdomTree Silver 3x | Invesco Municipal vs. Leverage Shares 3x |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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