Correlation Between M Large and Invesco Municipal
Can any of the company-specific risk be diversified away by investing in both M Large 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 M Large and Invesco Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between M Large Cap and Invesco Municipal Income, you can compare the effects of market volatilities on M Large 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 M Large with a short position of Invesco Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of M Large and Invesco Municipal.
Diversification Opportunities for M Large and Invesco Municipal
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between MTCGX and Invesco is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding M Large Cap and Invesco Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Municipal Income and M Large 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 M Large Cap 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 Income has no effect on the direction of M Large i.e., M Large and Invesco Municipal go up and down completely randomly.
Pair Corralation between M Large and Invesco Municipal
Assuming the 90 days horizon M Large Cap is expected to generate 4.12 times more return on investment than Invesco Municipal. However, M Large is 4.12 times more volatile than Invesco Municipal Income. It trades about 0.08 of its potential returns per unit of risk. Invesco Municipal Income is currently generating about 0.08 per unit of risk. If you would invest 2,430 in M Large Cap on September 12, 2024 and sell it today you would earn a total of 1,299 from holding M Large Cap or generate 53.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
M Large Cap vs. Invesco Municipal Income
Performance |
| Timeline |
| M Large Cap |
| Invesco Municipal Income |
M Large and Invesco Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with M Large and Invesco Municipal
The main advantage of trading using opposite M Large and Invesco Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M Large 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.| M Large vs. Vanguard Total Stock | M Large vs. Vanguard 500 Index | M Large vs. Vanguard Total Stock | M Large vs. Vanguard Total Stock |
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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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