Correlation Between Mastercard and Invesco Municipal
Can any of the company-specific risk be diversified away by investing in both Mastercard 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 Mastercard and Invesco Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mastercard and Invesco Municipal Opportunity, you can compare the effects of market volatilities on Mastercard 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 Mastercard with a short position of Invesco Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mastercard and Invesco Municipal.
Diversification Opportunities for Mastercard and Invesco Municipal
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Mastercard and Invesco is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Invesco Municipal Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Municipal and Mastercard 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 Mastercard 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 Mastercard i.e., Mastercard and Invesco Municipal go up and down completely randomly.
Pair Corralation between Mastercard and Invesco Municipal
Allowing for the 90-day total investment horizon Mastercard is expected to generate 1.75 times more return on investment than Invesco Municipal. However, Mastercard is 1.75 times more volatile than Invesco Municipal Opportunity. It trades about 0.17 of its potential returns per unit of risk. Invesco Municipal Opportunity is currently generating about 0.08 per unit of risk. If you would invest 48,148 in Mastercard on September 2, 2024 and sell it today you would earn a total of 5,146 from holding Mastercard or generate 10.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mastercard vs. Invesco Municipal Opportunity
Performance |
| Timeline |
| Mastercard |
| Invesco Municipal |
Mastercard and Invesco Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mastercard and Invesco Municipal
The main advantage of trading using opposite Mastercard and Invesco Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mastercard 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.| Mastercard vs. American Express | Mastercard vs. PayPal Holdings | Mastercard vs. Upstart Holdings | Mastercard vs. Capital One Financial |
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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