Correlation Between Invesco California and VanEck Intermediate
Can any of the company-specific risk be diversified away by investing in both Invesco California and VanEck Intermediate 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 Invesco California and VanEck Intermediate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco California AMT Free and VanEck Intermediate Muni, you can compare the effects of market volatilities on Invesco California and VanEck Intermediate 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 Invesco California with a short position of VanEck Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco California and VanEck Intermediate.
Diversification Opportunities for Invesco California and VanEck Intermediate
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Invesco and VanEck is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Invesco California AMT Free and VanEck Intermediate Muni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Intermediate Muni and Invesco California 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 Invesco California AMT Free are associated (or correlated) with VanEck Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Intermediate Muni has no effect on the direction of Invesco California i.e., Invesco California and VanEck Intermediate go up and down completely randomly.
Pair Corralation between Invesco California and VanEck Intermediate
Considering the 90-day investment horizon Invesco California AMT Free is expected to generate 1.52 times more return on investment than VanEck Intermediate. However, Invesco California is 1.52 times more volatile than VanEck Intermediate Muni. It trades about 0.09 of its potential returns per unit of risk. VanEck Intermediate Muni is currently generating about 0.1 per unit of risk. If you would invest 2,472 in Invesco California AMT Free on August 28, 2024 and sell it today you would earn a total of 27.00 from holding Invesco California AMT Free or generate 1.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco California AMT Free vs. VanEck Intermediate Muni
Performance |
| Timeline |
| Invesco California AMT |
| VanEck Intermediate Muni |
Invesco California and VanEck Intermediate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco California and VanEck Intermediate
The main advantage of trading using opposite Invesco California and VanEck Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco California position performs unexpectedly, VanEck Intermediate 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 VanEck Intermediate will offset losses from the drop in VanEck Intermediate's long position.| Invesco California vs. Invesco New York | Invesco California vs. Invesco VRDO Tax Free | Invesco California vs. Invesco National AMT Free |
| VanEck Intermediate vs. SSGA Active Trust | VanEck Intermediate vs. SPDR MarketAxess Investment | VanEck Intermediate vs. SSGA Active Trust |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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