Correlation Between Continental and Invesco Taxable

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

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

Diversification Opportunities for Continental and Invesco Taxable

0.62

Correlation Coefficient

Continental  Invesco Taxable

Poor diversification

The 3 months correlation between Continental and Invesco is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Caleres and Invesco Taxable Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Taxable Municipal and Continental 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 Caleres are associated (or correlated) with Invesco Taxable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Taxable Municipal has no effect on the direction of Continental i.e., Continental and Invesco Taxable go up and down completely randomly.

Pair Corralation between Continental and Invesco Taxable

Considering the 90-day investment horizon Caleres is expected to under-perform the Invesco Taxable. In addition to that, Continental is 8.55 times more volatile than Invesco Taxable Municipal. It trades about -0.13 of its total potential returns per unit of risk. Invesco Taxable Municipal is currently generating about -0.12 per unit of volatility. If you would invest  2,700  in Invesco Taxable Municipal on October 5, 2024 and sell it today you would lose (83.00) from holding Invesco Taxable Municipal or give up 3.07% of portfolio value over 90 days.

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

Caleres  vs.  Invesco Taxable Municipal

Continental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caleres has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Invesco Taxable Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Taxable Municipal has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Continental and Invesco Taxable

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

The idea behind Caleres and Invesco Taxable Municipal 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.