Correlation Between William Blair and Invesco Municipal

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

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

Diversification Opportunities for William Blair and Invesco Municipal

0.57

Correlation Coefficient

William Blair  Invesco Municipal

Very weak diversification

The 3 months correlation between William and Invesco is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding William Blair Large 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 William Blair 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 William Blair Large 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 William Blair i.e., William Blair and Invesco Municipal go up and down completely randomly.

Pair Corralation between William Blair and Invesco Municipal

Assuming the 90 days horizon William Blair Large is expected to generate 3.69 times more return on investment than Invesco Municipal. However, William Blair is 3.69 times more volatile than Invesco Municipal Income. It trades about 0.09 of its potential returns per unit of risk. Invesco Municipal Income is currently generating about 0.06 per unit of risk. If you would invest  1,800  in William Blair Large on December 2, 2024 and sell it today you would earn a total of  1,061  from holding William Blair Large or generate 58.94% return on investment over 90 days.

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

William Blair Large  vs.  Invesco Municipal Income

William Blair Large

Risk-Adjusted Performance

Very Weak

Over the last 90 days William Blair Large has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Invesco Municipal Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Municipal Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Invesco Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with William Blair and Invesco Municipal

The main advantage of trading using opposite William Blair and Invesco Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if William Blair 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 William Blair Large and Invesco Municipal Income 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.