Correlation Between Invesco Quality and DWS Municipal
Can any of the company-specific risk be diversified away by investing in both Invesco Quality and DWS 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 Invesco Quality and DWS Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco Quality Municipal and DWS Municipal Income, you can compare the effects of market volatilities on Invesco Quality and DWS 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 Invesco Quality with a short position of DWS Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Quality and DWS Municipal.
Diversification Opportunities for Invesco Quality and DWS Municipal
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Invesco and DWS is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Quality Municipal and DWS Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DWS Municipal Income and Invesco Quality 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 Invesco Quality Municipal are associated (or correlated) with DWS Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DWS Municipal Income has no effect on the direction of Invesco Quality i.e., Invesco Quality and DWS Municipal go up and down completely randomly.
Pair Corralation between Invesco Quality and DWS Municipal
Considering the 90-day investment horizon Invesco Quality Municipal is expected to generate 1.95 times more return on investment than DWS Municipal. However, Invesco Quality is 1.95 times more volatile than DWS Municipal Income. It trades about 0.22 of its potential returns per unit of risk. DWS Municipal Income is currently generating about 0.31 per unit of risk. If you would invest 980.00 in Invesco Quality Municipal on November 18, 2024 and sell it today you would earn a total of 27.00 from holding Invesco Quality Municipal or generate 2.76% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Invesco Quality Municipal vs. DWS Municipal Income
Performance |
Timeline |
Invesco Quality Municipal |
DWS Municipal Income |
Invesco Quality and DWS Municipal Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Invesco Quality and DWS Municipal
The main advantage of trading using opposite Invesco Quality and DWS Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Quality position performs unexpectedly, DWS 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 DWS Municipal will offset losses from the drop in DWS Municipal's long position.Invesco Quality vs. MFS Municipal Income | Invesco Quality vs. Blackrock Muniyield | Invesco Quality vs. MFS High Income | Invesco Quality vs. MFS High Yield |
DWS Municipal vs. DTF Tax Free | DWS Municipal vs. Blackrock Muniyield Quality | DWS Municipal vs. Blackrock Muni Intermediate | DWS Municipal vs. Blackrock Muniholdings Quality |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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