Correlation Between Invesco Municipal and Invesco Real
Can any of the company-specific risk be diversified away by investing in both Invesco Municipal and Invesco Real 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 Real 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 Real Estate, you can compare the effects of market volatilities on Invesco Municipal and Invesco Real 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 Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Municipal and Invesco Real.
Diversification Opportunities for Invesco Municipal and Invesco Real
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Invesco and Invesco is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Municipal Income and Invesco Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Real Estate 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 Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Real Estate has no effect on the direction of Invesco Municipal i.e., Invesco Municipal and Invesco Real go up and down completely randomly.
Pair Corralation between Invesco Municipal and Invesco Real
Assuming the 90 days horizon Invesco Municipal is expected to generate 4.21 times less return on investment than Invesco Real. But when comparing it to its historical volatility, Invesco Municipal Income is 3.44 times less risky than Invesco Real. It trades about 0.12 of its potential returns per unit of risk. Invesco Real Estate is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,571 in Invesco Real Estate on August 24, 2024 and sell it today you would earn a total of 254.00 from holding Invesco Real Estate or generate 16.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco Municipal Income vs. Invesco Real Estate
Performance |
| Timeline |
| Invesco Municipal Income |
| Invesco Real Estate |
Invesco Municipal and Invesco Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco Municipal and Invesco Real
The main advantage of trading using opposite Invesco Municipal and Invesco Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Municipal position performs unexpectedly, Invesco Real 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 Real will offset losses from the drop in Invesco Real's long position.The idea behind Invesco Municipal Income and Invesco Real Estate 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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