Correlation Between Oil Gas and Invesco Municipal
Can any of the company-specific risk be diversified away by investing in both Oil Gas and Invesco Municipal 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 Oil Gas and Invesco Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oil Gas Ultrasector and Invesco Municipal Income, you can compare the effects of market volatilities on Oil Gas and Invesco Municipal 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 Oil Gas with a short position of Invesco Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil Gas and Invesco Municipal.
Diversification Opportunities for Oil Gas and Invesco Municipal
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Oil and Invesco is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Oil Gas Ultrasector and Invesco Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Municipal Income and Oil Gas 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 Oil Gas Ultrasector are associated (or correlated) with Invesco Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Municipal Income has no effect on the direction of Oil Gas i.e., Oil Gas and Invesco Municipal go up and down completely randomly.
Pair Corralation between Oil Gas and Invesco Municipal
Assuming the 90 days horizon Oil Gas Ultrasector is expected to under-perform the Invesco Municipal. In addition to that, Oil Gas is 5.03 times more volatile than Invesco Municipal Income. It trades about -0.75 of its total potential returns per unit of risk. Invesco Municipal Income is currently generating about -0.28 per unit of volatility. If you would invest 1,210 in Invesco Municipal Income on September 25, 2024 and sell it today you would lose (19.00) from holding Invesco Municipal Income or give up 1.57% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 95.24% |
Values | Daily Returns |
Oil Gas Ultrasector vs. Invesco Municipal Income
Performance |
Timeline |
Oil Gas Ultrasector |
Invesco Municipal Income |
Oil Gas and Invesco Municipal Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Oil Gas and Invesco Municipal
The main advantage of trading using opposite Oil Gas and Invesco Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil Gas position performs unexpectedly, Invesco Municipal 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 Municipal will offset losses from the drop in Invesco Municipal's long position.Oil Gas vs. Oil Gas Ultrasector | Oil Gas vs. Ultramid Cap Profund Ultramid Cap | Oil Gas vs. Precious Metals Ultrasector | Oil Gas vs. Real Estate Ultrasector |
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Check out your portfolio center.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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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