Correlation Between First Trust and Invesco Municipal
Can any of the company-specific risk be diversified away by investing in both First Trust 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 First Trust and Invesco Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Intermediate and Invesco Municipal Opportunity, you can compare the effects of market volatilities on First Trust 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 First Trust with a short position of Invesco Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Invesco Municipal.
Diversification Opportunities for First Trust and Invesco Municipal
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Invesco is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Intermediate and Invesco Municipal Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Municipal and First Trust 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 First Trust Intermediate 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 has no effect on the direction of First Trust i.e., First Trust and Invesco Municipal go up and down completely randomly.
Pair Corralation between First Trust and Invesco Municipal
Considering the 90-day investment horizon First Trust Intermediate is expected to generate 0.55 times more return on investment than Invesco Municipal. However, First Trust Intermediate is 1.81 times less risky than Invesco Municipal. It trades about -0.03 of its potential returns per unit of risk. Invesco Municipal Opportunity is currently generating about -0.1 per unit of risk. If you would invest 1,845 in First Trust Intermediate on September 18, 2024 and sell it today you would lose (5.00) from holding First Trust Intermediate or give up 0.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Intermediate vs. Invesco Municipal Opportunity
Performance |
| Timeline |
| First Trust Intermediate |
| Invesco Municipal |
First Trust and Invesco Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Invesco Municipal
The main advantage of trading using opposite First Trust and Invesco Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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.| First Trust vs. RiverNorth Flexible Municipalome | First Trust vs. DWS Municipal Income | First Trust vs. Blackrock Munivest | First Trust vs. MFS Municipal Income |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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