Correlation Between Vanguard 500 and Invesco Municipal
Can any of the company-specific risk be diversified away by investing in both Vanguard 500 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 Vanguard 500 and Invesco Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard 500 Index and Invesco Municipal Income, you can compare the effects of market volatilities on Vanguard 500 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 Vanguard 500 with a short position of Invesco Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and Invesco Municipal.
Diversification Opportunities for Vanguard 500 and Invesco Municipal
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vanguard and Invesco is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index 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 Vanguard 500 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 Vanguard 500 Index 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 Vanguard 500 i.e., Vanguard 500 and Invesco Municipal go up and down completely randomly.
Pair Corralation between Vanguard 500 and Invesco Municipal
Assuming the 90 days horizon Vanguard 500 is expected to generate 1.25 times less return on investment than Invesco Municipal. In addition to that, Vanguard 500 is 2.4 times more volatile than Invesco Municipal Income. It trades about 0.14 of its total potential returns per unit of risk. Invesco Municipal Income is currently generating about 0.42 per unit of volatility. If you would invest 645.00 in Invesco Municipal Income on September 12, 2024 and sell it today you would earn a total of 12.00 from holding Invesco Municipal Income or generate 1.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Vanguard 500 Index vs. Invesco Municipal Income
Performance |
| Timeline |
| Vanguard 500 Index |
| Invesco Municipal Income |
Vanguard 500 and Invesco Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard 500 and Invesco Municipal
The main advantage of trading using opposite Vanguard 500 and Invesco Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 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.| Vanguard 500 vs. Vanguard Total Stock | Vanguard 500 vs. Vanguard 500 Index | Vanguard 500 vs. Vanguard Total Stock | Vanguard 500 vs. Vanguard Total Stock |
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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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