Correlation Between Invesco Municipal and First Trust
Can any of the company-specific risk be diversified away by investing in both Invesco Municipal and First Trust 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 First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco Municipal Opportunity and First Trust Senior, you can compare the effects of market volatilities on Invesco Municipal and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Municipal and First Trust.
Diversification Opportunities for Invesco Municipal and First Trust
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Invesco and First is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Municipal Opportunity and First Trust Senior in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Senior 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 Opportunity are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Senior has no effect on the direction of Invesco Municipal i.e., Invesco Municipal and First Trust go up and down completely randomly.
Pair Corralation between Invesco Municipal and First Trust
Considering the 90-day investment horizon Invesco Municipal Opportunity is expected to under-perform the First Trust. In addition to that, Invesco Municipal is 1.52 times more volatile than First Trust Senior. It trades about -0.1 of its total potential returns per unit of risk. First Trust Senior is currently generating about 0.15 per unit of volatility. If you would invest 1,026 in First Trust Senior on September 18, 2024 and sell it today you would earn a total of 15.00 from holding First Trust Senior or generate 1.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco Municipal Opportunity vs. First Trust Senior
Performance |
| Timeline |
| Invesco Municipal |
| First Trust Senior |
Invesco Municipal and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco Municipal and First Trust
The main advantage of trading using opposite Invesco Municipal and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Municipal position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Invesco Municipal vs. Invesco Quality Municipal | Invesco Municipal vs. Invesco Advantage MIT | Invesco Municipal vs. Invesco Municipal Trust | Invesco Municipal vs. Invesco California Value |
| First Trust vs. Blackstone Gso Long | First Trust vs. Eaton Vance Senior | First Trust vs. Western Asset Global | First Trust vs. Western Asset Global |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
Other Complementary Tools
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories |