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 Intermediate, 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
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Invesco and First is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Municipal Opportunity and First Trust Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Intermediate 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 Intermediate 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 1.81 times more volatile than First Trust Intermediate. It trades about -0.1 of its total potential returns per unit of risk. First Trust Intermediate is currently generating about -0.03 per unit of volatility. If you would invest 1,845 in First Trust Intermediate on September 18, 2024 and sell it today you would lose (5.00) from holding First Trust Intermediate or give up 0.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco Municipal Opportunity vs. First Trust Intermediate
Performance |
| Timeline |
| Invesco Municipal |
| First Trust Intermediate |
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. RiverNorth Flexible Municipalome | First Trust vs. DWS Municipal Income | First Trust vs. Blackrock Munivest | First Trust vs. MFS Municipal Income |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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