Correlation Between High Yield and Invesco Disciplined

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

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

Diversification Opportunities for High Yield and Invesco Disciplined

0.72

Correlation Coefficient

High Yield  Invesco Disciplined

Poor diversification

The 3 months correlation between High and Invesco is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund and Invesco Disciplined Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Disciplined and High Yield 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 High Yield Municipal Fund are associated (or correlated) with Invesco Disciplined. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Disciplined has no effect on the direction of High Yield i.e., High Yield and Invesco Disciplined go up and down completely randomly.

Pair Corralation between High Yield and Invesco Disciplined

Assuming the 90 days horizon High Yield is expected to generate 3.88 times less return on investment than Invesco Disciplined. But when comparing it to its historical volatility, High Yield Municipal Fund is 2.8 times less risky than Invesco Disciplined. It trades about 0.05 of its potential returns per unit of risk. Invesco Disciplined Equity is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,440  in Invesco Disciplined Equity on October 9, 2024 and sell it today you would earn a total of  710.00  from holding Invesco Disciplined Equity or generate 29.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

High Yield Municipal Fund  vs.  Invesco Disciplined Equity

High Yield Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days High Yield Municipal Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, High Yield is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco Disciplined

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Disciplined Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Invesco Disciplined is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with High Yield and Invesco Disciplined

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

The idea behind High Yield Municipal Fund and Invesco Disciplined Equity 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.