Correlation Between VanEck Intermediate and Invesco California

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

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

Diversification Opportunities for VanEck Intermediate and Invesco California

0.74

Correlation Coefficient

VanEck Intermediate  Invesco California

Poor diversification

The 3 months correlation between VanEck and Invesco is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Intermediate Muni and Invesco California AMT Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco California AMT and VanEck Intermediate 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 VanEck Intermediate Muni 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 AMT has no effect on the direction of VanEck Intermediate i.e., VanEck Intermediate and Invesco California go up and down completely randomly.

Pair Corralation between VanEck Intermediate and Invesco California

Considering the 90-day investment horizon VanEck Intermediate Muni is expected to generate 0.61 times more return on investment than Invesco California. However, VanEck Intermediate Muni is 1.63 times less risky than Invesco California. It trades about 0.37 of its potential returns per unit of risk. Invesco California AMT Free is currently generating about 0.08 per unit of risk. If you would invest  4,598  in VanEck Intermediate Muni on December 4, 2024 and sell it today you would earn a total of  69.00  from holding VanEck Intermediate Muni or generate 1.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

VanEck Intermediate Muni  vs.  Invesco California AMT Free

VanEck Intermediate Muni

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Intermediate Muni are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, VanEck Intermediate is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Invesco California AMT

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco California AMT Free has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Invesco California is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with VanEck Intermediate and Invesco California

The main advantage of trading using opposite VanEck Intermediate and Invesco California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Intermediate 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 VanEck Intermediate Muni and Invesco California AMT Free 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.