Correlation Between Invesco Taxable and FlexShares Credit

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

Diversification Opportunities for Invesco Taxable and FlexShares Credit

0.95

Correlation Coefficient

Invesco Taxable  FlexShares Credit

Almost no diversification

The 3 months correlation between Invesco and FlexShares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Taxable Municipal and FlexShares Credit Scored Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Credit 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 FlexShares Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Credit has no effect on the direction of Invesco Taxable i.e., Invesco Taxable and FlexShares Credit go up and down completely randomly.

Pair Corralation between Invesco Taxable and FlexShares Credit

Considering the 90-day investment horizon Invesco Taxable Municipal is expected to generate 0.71 times more return on investment than FlexShares Credit. However, Invesco Taxable Municipal is 1.41 times less risky than FlexShares Credit. It trades about 0.09 of its potential returns per unit of risk. FlexShares Credit Scored Long is currently generating about 0.04 per unit of risk. If you would invest  2,599  in Invesco Taxable Municipal on December 30, 2024 and sell it today you would earn a total of  57.00  from holding Invesco Taxable Municipal or generate 2.19% return on investment over 90 days.

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

Invesco Taxable Municipal  vs.  FlexShares Credit Scored Long

Invesco Taxable Municipal

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Taxable Municipal are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. 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.

FlexShares Credit

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares Credit Scored Long are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, FlexShares Credit is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Invesco Taxable and FlexShares Credit

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

The idea behind Invesco Taxable Municipal and FlexShares Credit Scored Long 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.