Correlation Between LendingClub Corp and Invesco Municipal

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

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

Diversification Opportunities for LendingClub Corp and Invesco Municipal

-0.45

Correlation Coefficient

LendingClub Corp  Invesco Municipal

Very good diversification

The 3 months correlation between LendingClub and Invesco is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding LendingClub Corp and Invesco Municipal Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Municipal and LendingClub Corp 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 LendingClub Corp 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 has no effect on the direction of LendingClub Corp i.e., LendingClub Corp and Invesco Municipal go up and down completely randomly.

Pair Corralation between LendingClub Corp and Invesco Municipal

Allowing for the 90-day total investment horizon LendingClub Corp is expected to generate 4.55 times more return on investment than Invesco Municipal. However, LendingClub Corp is 4.55 times more volatile than Invesco Municipal Opportunity. It trades about 0.0 of its potential returns per unit of risk. Invesco Municipal Opportunity is currently generating about -0.29 per unit of risk. If you would invest  1,658  in LendingClub Corp on September 25, 2024 and sell it today you would lose (12.00) from holding LendingClub Corp or give up 0.72% of portfolio value over 90 days.

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

LendingClub Corp  vs.  Invesco Municipal Opportunity

LendingClub Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LendingClub Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal fundamental indicators, LendingClub Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Invesco Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Municipal Opportunity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Invesco Municipal is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with LendingClub Corp and Invesco Municipal

The main advantage of trading using opposite LendingClub Corp and Invesco Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LendingClub Corp 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.

The idea behind LendingClub Corp and Invesco Municipal Opportunity 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.