Correlation Between Invesco Taxable and IShares Core

Can any of the company-specific risk be diversified away by investing in both Invesco Taxable and IShares Core 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 Taxable and IShares Core into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Invesco Taxable Municipal and iShares Core 10, you can compare the effects of market volatilities on Invesco Taxable and IShares Core 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 Taxable with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Taxable and IShares Core.

Diversification Opportunities for Invesco Taxable and IShares Core

0.99

Correlation Coefficient

Invesco Taxable  IShares Core

No risk reduction

The 3 months correlation between Invesco and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Taxable Municipal and iShares Core 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core 10 and Invesco Taxable 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 Taxable Municipal are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core 10 has no effect on the direction of Invesco Taxable i.e., Invesco Taxable and IShares Core go up and down completely randomly.

Pair Corralation between Invesco Taxable and IShares Core

Considering the 90-day investment horizon Invesco Taxable Municipal is expected to generate 0.58 times more return on investment than IShares Core. However, Invesco Taxable Municipal is 1.71 times less risky than IShares Core. It trades about -0.02 of its potential returns per unit of risk. iShares Core 10 is currently generating about -0.02 per unit of risk. If you would invest  2,722  in Invesco Taxable Municipal on September 2, 2024 and sell it today you would lose (16.00) from holding Invesco Taxable Municipal or give up 0.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Invesco Taxable Municipal  vs.  iShares Core 10

Invesco Taxable Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Taxable Municipal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Invesco Taxable is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

iShares Core 10

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core 10 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invesco Taxable and IShares Core

The main advantage of trading using opposite Invesco Taxable and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Taxable position performs unexpectedly, IShares Core 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 IShares Core will offset losses from the drop in IShares Core's long position.

The idea behind Invesco Taxable Municipal and iShares Core 10 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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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.