Correlation Between Invesco Quality and Invesco Municipal

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

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

Diversification Opportunities for Invesco Quality and Invesco Municipal

0.94

Correlation Coefficient

Invesco Quality  Invesco Municipal

Almost no diversification

The 3 months correlation between Invesco and Invesco is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Quality Municipal and Invesco Municipal Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Municipal and Invesco Quality 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 Quality Municipal are associated (or correlated) with Invesco Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Municipal has no effect on the direction of Invesco Quality i.e., Invesco Quality and Invesco Municipal go up and down completely randomly.

Pair Corralation between Invesco Quality and Invesco Municipal

Considering the 90-day investment horizon Invesco Quality Municipal is expected to generate 1.0 times more return on investment than Invesco Municipal. However, Invesco Quality Municipal is 1.0 times less risky than Invesco Municipal. It trades about 0.09 of its potential returns per unit of risk. Invesco Municipal Opportunity is currently generating about 0.08 per unit of risk. If you would invest  998.00  in Invesco Quality Municipal on August 31, 2024 and sell it today you would earn a total of  29.00  from holding Invesco Quality Municipal or generate 2.91% return on investment over 90 days.

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

Invesco Quality Municipal  vs.  Invesco Municipal Opportunity

Invesco Quality Municipal

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Quality Municipal are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Invesco Quality is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Invesco Municipal

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Municipal Opportunity are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Invesco Municipal is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Invesco Quality and Invesco Municipal

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

The idea behind Invesco Quality Municipal and Invesco Municipal Opportunity 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.