Correlation Between Putnam Municipal and Invesco Municipal
Can any of the company-specific risk be diversified away by investing in both Putnam Municipal 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 Putnam Municipal and Invesco Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Putnam Municipal Opportunities and Invesco Municipal Income, you can compare the effects of market volatilities on Putnam Municipal 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 Putnam Municipal with a short position of Invesco Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Municipal and Invesco Municipal.
Diversification Opportunities for Putnam Municipal and Invesco Municipal
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Putnam and Invesco is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Municipal Opportunities 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 Putnam Municipal 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 Putnam Municipal Opportunities 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 Putnam Municipal i.e., Putnam Municipal and Invesco Municipal go up and down completely randomly.
Pair Corralation between Putnam Municipal and Invesco Municipal
Considering the 90-day investment horizon Putnam Municipal is expected to generate 1.4 times less return on investment than Invesco Municipal. But when comparing it to its historical volatility, Putnam Municipal Opportunities is 1.35 times less risky than Invesco Municipal. It trades about 0.12 of its potential returns per unit of risk. Invesco Municipal Income is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 484.00 in Invesco Municipal Income on August 26, 2024 and sell it today you would earn a total of 165.00 from holding Invesco Municipal Income or generate 34.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Putnam Municipal Opportunities vs. Invesco Municipal Income
Performance |
| Timeline |
| Putnam Municipal Opp |
| Invesco Municipal Income |
Putnam Municipal and Invesco Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Putnam Municipal and Invesco Municipal
The main advantage of trading using opposite Putnam Municipal and Invesco Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Putnam Municipal 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.| Putnam Municipal vs. Invesco Municipal Income | Putnam Municipal vs. DWS Municipal Income | Putnam Municipal vs. MFS Municipal Income | Putnam Municipal vs. MFS High Income |
| Invesco Municipal vs. DWS Municipal Income | Invesco Municipal vs. MFS Municipal Income | Invesco Municipal vs. MFS High Income | Invesco Municipal vs. Blackrock Muniyield |
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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