Correlation Between NYSE Composite and Invesco Quality
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Invesco Quality 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 NYSE Composite and Invesco Quality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Invesco Quality Municipal, you can compare the effects of market volatilities on NYSE Composite and Invesco Quality 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 NYSE Composite with a short position of Invesco Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Invesco Quality.
Diversification Opportunities for NYSE Composite and Invesco Quality
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and Invesco is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Invesco Quality Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Quality Municipal and NYSE Composite 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 NYSE Composite are associated (or correlated) with Invesco Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Quality Municipal has no effect on the direction of NYSE Composite i.e., NYSE Composite and Invesco Quality go up and down completely randomly.
Pair Corralation between NYSE Composite and Invesco Quality
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.32 times more return on investment than Invesco Quality. However, NYSE Composite is 1.32 times more volatile than Invesco Quality Municipal. It trades about 0.33 of its potential returns per unit of risk. Invesco Quality Municipal is currently generating about 0.06 per unit of risk. If you would invest 1,909,542 in NYSE Composite on November 3, 2024 and sell it today you would earn a total of 90,340 from holding NYSE Composite or generate 4.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Invesco Quality Municipal
Performance |
| Timeline |
NYSE Composite and Invesco Quality Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Invesco Quality Municipal
Pair trading matchups for Invesco Quality
Pair Trading with NYSE Composite and Invesco Quality
The main advantage of trading using opposite NYSE Composite and Invesco Quality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Invesco Quality 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 Quality will offset losses from the drop in Invesco Quality's long position.| NYSE Composite vs. Palomar Holdings | NYSE Composite vs. The Peoples Insurance | NYSE Composite vs. Radian Group | NYSE Composite vs. Nascent Wine |
| Invesco Quality vs. MFS Municipal Income | Invesco Quality vs. Blackrock Muniyield | Invesco Quality vs. MFS High Income | Invesco Quality vs. MFS High Yield |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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