Correlation Between Invesco Municipal and Invesco SP

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

By analyzing existing cross correlation between Invesco Municipal Bond and Invesco SP 500, you can compare the effects of market volatilities on Invesco Municipal and Invesco SP 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 Invesco Municipal with a short position of Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Municipal and Invesco SP.

Diversification Opportunities for Invesco Municipal and Invesco SP

0.65

Correlation Coefficient

Invesco Municipal  Invesco SP

Poor diversification

The 3 months correlation between Invesco and Invesco is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Municipal Bond and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 500 and Invesco Municipal 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 Invesco Municipal Bond are associated (or correlated) with Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP 500 has no effect on the direction of Invesco Municipal i.e., Invesco Municipal and Invesco SP go up and down completely randomly.

Pair Corralation between Invesco Municipal and Invesco SP

Assuming the 90 days trading horizon Invesco Municipal Bond is expected to under-perform the Invesco SP. But the etf apears to be less risky and, when comparing its historical volatility, Invesco Municipal Bond is 1.41 times less risky than Invesco SP. The etf trades about -0.01 of its potential returns per unit of risk. The Invesco SP 500 is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,760  in Invesco SP 500 on October 11, 2024 and sell it today you would earn a total of  1,127  from holding Invesco SP 500 or generate 23.68% return on investment over 90 days.

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

Invesco Municipal Bond  vs.  Invesco SP 500

Invesco Municipal Bond

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Municipal Bond are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Invesco Municipal is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Invesco SP 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Invesco SP is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Invesco Municipal and Invesco SP

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

The idea behind Invesco Municipal Bond and Invesco SP 500 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.

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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.