Correlation Between Visa and Invesco Municipal
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and Invesco Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Invesco Municipal Trust, you can compare the effects of market volatilities on Visa 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 Visa with a short position of Invesco Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Invesco Municipal.
Diversification Opportunities for Visa and Invesco Municipal
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and Invesco is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Invesco Municipal Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Municipal Trust and Visa 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 Visa Class A 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 Trust has no effect on the direction of Visa i.e., Visa and Invesco Municipal go up and down completely randomly.
Pair Corralation between Visa and Invesco Municipal
Taking into account the 90-day investment horizon Visa Class A is expected to under-perform the Invesco Municipal. In addition to that, Visa is 2.76 times more volatile than Invesco Municipal Trust. It trades about -0.19 of its total potential returns per unit of risk. Invesco Municipal Trust is currently generating about -0.27 per unit of volatility. If you would invest 997.00 in Invesco Municipal Trust on January 5, 2025 and sell it today you would lose (45.00) from holding Invesco Municipal Trust or give up 4.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Invesco Municipal Trust
Performance |
| Timeline |
| Visa Class A |
| Invesco Municipal Trust |
Visa and Invesco Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Invesco Municipal
The main advantage of trading using opposite Visa and Invesco Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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