Correlation Between Invesco California and Nuveen California

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

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

Diversification Opportunities for Invesco California and Nuveen California

0.69

Correlation Coefficient

Invesco California  Nuveen California

Poor diversification

The 3 months correlation between Invesco and Nuveen is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Invesco California Value and Nuveen California Amt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen California Amt and Invesco California 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 California Value are associated (or correlated) with Nuveen California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen California Amt has no effect on the direction of Invesco California i.e., Invesco California and Nuveen California go up and down completely randomly.

Pair Corralation between Invesco California and Nuveen California

Considering the 90-day investment horizon Invesco California Value is expected to generate 0.88 times more return on investment than Nuveen California. However, Invesco California Value is 1.14 times less risky than Nuveen California. It trades about 0.01 of its potential returns per unit of risk. Nuveen California Amt is currently generating about -0.02 per unit of risk. If you would invest  1,050  in Invesco California Value on September 5, 2024 and sell it today you would earn a total of  5.00  from holding Invesco California Value or generate 0.48% return on investment over 90 days.

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

Invesco California Value  vs.  Nuveen California Amt

Invesco California Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco California Value has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Invesco California is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Nuveen California Amt

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuveen California Amt has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking signals, Nuveen California is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invesco California and Nuveen California

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

The idea behind Invesco California Value and Nuveen California Amt 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.