Correlation Between Invesco Municipal and Sprott

Can any of the company-specific risk be diversified away by investing in both Invesco Municipal and Sprott 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 Sprott 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 Sprott Inc, you can compare the effects of market volatilities on Invesco Municipal and Sprott 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 Sprott. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Municipal and Sprott.

Diversification Opportunities for Invesco Municipal and Sprott

0.27

Correlation Coefficient

Invesco Municipal  Sprott

Modest diversification

The 3 months correlation between Invesco and Sprott is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Municipal Income and Sprott Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Inc 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 Sprott. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Inc has no effect on the direction of Invesco Municipal i.e., Invesco Municipal and Sprott go up and down completely randomly.

Pair Corralation between Invesco Municipal and Sprott

Considering the 90-day investment horizon Invesco Municipal Income is expected to under-perform the Sprott. But the stock apears to be less risky and, when comparing its historical volatility, Invesco Municipal Income is 2.46 times less risky than Sprott. The stock trades about -0.03 of its potential returns per unit of risk. The Sprott Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  4,060  in Sprott Inc on September 12, 2024 and sell it today you would earn a total of  493.00  from holding Sprott Inc or generate 12.14% 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.  Sprott Inc

Invesco Municipal Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sprott Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, Sprott may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Invesco Municipal and Sprott

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

The idea behind Invesco Municipal Income and Sprott Inc 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.