Correlation Between Overlay Shares and Invesco National
Can any of the company-specific risk be diversified away by investing in both Overlay Shares and Invesco National 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 Overlay Shares and Invesco National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Overlay Shares Municipal and Invesco National AMT Free, you can compare the effects of market volatilities on Overlay Shares and Invesco National 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 Overlay Shares with a short position of Invesco National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Overlay Shares and Invesco National.
Diversification Opportunities for Overlay Shares and Invesco National
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Overlay and Invesco is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Overlay Shares Municipal and Invesco National AMT Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco National AMT and Overlay Shares 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 Overlay Shares Municipal are associated (or correlated) with Invesco National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco National AMT has no effect on the direction of Overlay Shares i.e., Overlay Shares and Invesco National go up and down completely randomly.
Pair Corralation between Overlay Shares and Invesco National
Considering the 90-day investment horizon Overlay Shares is expected to generate 1.01 times less return on investment than Invesco National. But when comparing it to its historical volatility, Overlay Shares Municipal is 1.7 times less risky than Invesco National. It trades about 0.2 of its potential returns per unit of risk. Invesco National AMT Free is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,367 in Invesco National AMT Free on August 28, 2024 and sell it today you would earn a total of 33.00 from holding Invesco National AMT Free or generate 1.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Overlay Shares Municipal vs. Invesco National AMT Free
Performance |
| Timeline |
| Overlay Shares Municipal |
| Invesco National AMT |
Overlay Shares and Invesco National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Overlay Shares and Invesco National
The main advantage of trading using opposite Overlay Shares and Invesco National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Overlay Shares position performs unexpectedly, Invesco National 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 National will offset losses from the drop in Invesco National's long position.| Overlay Shares vs. Overlay Shares Core | Overlay Shares vs. Overlay Shares Large | Overlay Shares vs. Overlay Shares Foreign | Overlay Shares vs. OVS SpA |
| Invesco National vs. Franklin Liberty Intermediate | Invesco National vs. Hartford Municipal Opportunities | Invesco National vs. IQ MacKay Municipal |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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