Correlation Between DTF Tax and Invesco California

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

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

Diversification Opportunities for DTF Tax and Invesco California

-0.07

Correlation Coefficient

DTF Tax  Invesco California

Good diversification

The 3 months correlation between DTF and Invesco is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding DTF Tax Free and Invesco California Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco California Value and DTF Tax 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 DTF Tax Free are associated (or correlated) with Invesco California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco California Value has no effect on the direction of DTF Tax i.e., DTF Tax and Invesco California go up and down completely randomly.

Pair Corralation between DTF Tax and Invesco California

Considering the 90-day investment horizon DTF Tax Free is expected to generate 0.42 times more return on investment than Invesco California. However, DTF Tax Free is 2.4 times less risky than Invesco California. It trades about 0.05 of its potential returns per unit of risk. Invesco California Value is currently generating about -0.02 per unit of risk. If you would invest  1,119  in DTF Tax Free on August 31, 2024 and sell it today you would earn a total of  10.00  from holding DTF Tax Free or generate 0.89% return on investment over 90 days.

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

DTF Tax Free  vs.  Invesco California Value

DTF Tax Free

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DTF Tax Free are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, DTF Tax is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with DTF Tax and Invesco California

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

The idea behind DTF Tax Free and Invesco California Value 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .