Correlation Between Invesco Municipal and Invesco European
Can any of the company-specific risk be diversified away by investing in both Invesco Municipal and Invesco European 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 European 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 European Growth, you can compare the effects of market volatilities on Invesco Municipal and Invesco European 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 European. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Municipal and Invesco European.
Diversification Opportunities for Invesco Municipal and Invesco European
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Invesco and Invesco is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Municipal Income and Invesco European Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco European Growth 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 European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco European Growth has no effect on the direction of Invesco Municipal i.e., Invesco Municipal and Invesco European go up and down completely randomly.
Pair Corralation between Invesco Municipal and Invesco European
Assuming the 90 days horizon Invesco Municipal is expected to generate 2.13 times less return on investment than Invesco European. But when comparing it to its historical volatility, Invesco Municipal Income is 3.08 times less risky than Invesco European. It trades about 0.07 of its potential returns per unit of risk. Invesco European Growth is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,935 in Invesco European Growth on August 30, 2024 and sell it today you would earn a total of 605.00 from holding Invesco European Growth or generate 20.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco Municipal Income vs. Invesco European Growth
Performance |
| Timeline |
| Invesco Municipal Income |
| Invesco European Growth |
Invesco Municipal and Invesco European Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco Municipal and Invesco European
The main advantage of trading using opposite Invesco Municipal and Invesco European positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Municipal position performs unexpectedly, Invesco European 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 European will offset losses from the drop in Invesco European's long position.| Invesco Municipal vs. Invesco Municipal Income | Invesco Municipal vs. Invesco Municipal Income | Invesco Municipal vs. Oppenheimer Rising Dividends | Invesco Municipal vs. Invesco High Yield |
| Invesco European vs. Invesco Municipal Income | Invesco European vs. Invesco Municipal Income | Invesco European vs. Invesco Municipal Income | Invesco European vs. Oppenheimer Rising Dividends |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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