Correlation Between Nuveen Pennsylvania and Invesco Advantage

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

By analyzing existing cross correlation between Nuveen Pennsylvania Quality and Invesco Advantage MIT, you can compare the effects of market volatilities on Nuveen Pennsylvania and Invesco Advantage 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 Nuveen Pennsylvania with a short position of Invesco Advantage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuveen Pennsylvania and Invesco Advantage.

Diversification Opportunities for Nuveen Pennsylvania and Invesco Advantage

0.87

Correlation Coefficient

Nuveen Pennsylvania  Invesco Advantage

Very poor diversification

The 3 months correlation between Nuveen and Invesco is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Pennsylvania Quality and Invesco Advantage MIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Advantage MIT and Nuveen Pennsylvania 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 Nuveen Pennsylvania Quality are associated (or correlated) with Invesco Advantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Advantage MIT has no effect on the direction of Nuveen Pennsylvania i.e., Nuveen Pennsylvania and Invesco Advantage go up and down completely randomly.

Pair Corralation between Nuveen Pennsylvania and Invesco Advantage

Considering the 90-day investment horizon Nuveen Pennsylvania Quality is expected to generate 1.08 times more return on investment than Invesco Advantage. However, Nuveen Pennsylvania is 1.08 times more volatile than Invesco Advantage MIT. It trades about 0.07 of its potential returns per unit of risk. Invesco Advantage MIT is currently generating about -0.04 per unit of risk. If you would invest  1,086  in Nuveen Pennsylvania Quality on December 28, 2024 and sell it today you would earn a total of  26.00  from holding Nuveen Pennsylvania Quality or generate 2.39% return on investment over 90 days.

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

Nuveen Pennsylvania Quality  vs.  Invesco Advantage MIT

Nuveen Pennsylvania

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Pennsylvania Quality are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. Even with relatively invariable basic indicators, Nuveen Pennsylvania is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Invesco Advantage MIT

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Advantage MIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward-looking signals, Invesco Advantage is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Nuveen Pennsylvania and Invesco Advantage

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

The idea behind Nuveen Pennsylvania Quality and Invesco Advantage MIT 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..