Correlation Between Invesco Municipal and Invesco Short
Can any of the company-specific risk be diversified away by investing in both Invesco Municipal and Invesco Short 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 Municipal and Invesco Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco Municipal Income and Invesco Short Duration, you can compare the effects of market volatilities on Invesco Municipal and Invesco Short 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 Municipal with a short position of Invesco Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Municipal and Invesco Short.
Diversification Opportunities for Invesco Municipal and Invesco Short
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Invesco and Invesco is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Municipal Income and Invesco Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Short Duration and Invesco 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 Invesco Municipal Income are associated (or correlated) with Invesco Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Short Duration has no effect on the direction of Invesco Municipal i.e., Invesco Municipal and Invesco Short go up and down completely randomly.
Pair Corralation between Invesco Municipal and Invesco Short
Assuming the 90 days horizon Invesco Municipal Income is expected to generate 1.81 times more return on investment than Invesco Short. However, Invesco Municipal is 1.81 times more volatile than Invesco Short Duration. It trades about 0.13 of its potential returns per unit of risk. Invesco Short Duration is currently generating about 0.18 per unit of risk. If you would invest 1,163 in Invesco Municipal Income on August 29, 2024 and sell it today you would earn a total of 46.00 from holding Invesco Municipal Income or generate 3.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco Municipal Income vs. Invesco Short Duration
Performance |
| Timeline |
| Invesco Municipal Income |
| Invesco Short Duration |
Invesco Municipal and Invesco Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco Municipal and Invesco Short
The main advantage of trading using opposite Invesco Municipal and Invesco Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Municipal position performs unexpectedly, Invesco Short 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 Short will offset losses from the drop in Invesco Short's long position.The idea behind Invesco Municipal Income and Invesco Short Duration pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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