Correlation Between Invesco Municipal and Invesco Trust

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

By analyzing existing cross correlation between Invesco Municipal Income and Invesco Trust For, you can compare the effects of market volatilities on Invesco Municipal and Invesco Trust 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 Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Municipal and Invesco Trust.

Diversification Opportunities for Invesco Municipal and Invesco Trust

0.56

Correlation Coefficient

Invesco Municipal  Invesco Trust

Very weak diversification

The 3 months correlation between Invesco and Invesco is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Municipal Income and Invesco Trust For in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Trust For 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 Income are associated (or correlated) with Invesco Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Trust For has no effect on the direction of Invesco Municipal i.e., Invesco Municipal and Invesco Trust go up and down completely randomly.

Pair Corralation between Invesco Municipal and Invesco Trust

Considering the 90-day investment horizon Invesco Municipal Income is expected to generate 1.46 times more return on investment than Invesco Trust. However, Invesco Municipal is 1.46 times more volatile than Invesco Trust For. It trades about 0.09 of its potential returns per unit of risk. Invesco Trust For is currently generating about 0.08 per unit of risk. If you would invest  637.00  in Invesco Municipal Income on September 2, 2024 and sell it today you would earn a total of  29.00  from holding Invesco Municipal Income or generate 4.55% return on investment over 90 days.

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

Invesco Municipal Income  vs.  Invesco Trust For

Invesco Municipal Income

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Municipal Income are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, Invesco Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco Trust For

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Trust For are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Invesco Trust is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Invesco Municipal and Invesco Trust

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

The idea behind Invesco Municipal Income and Invesco Trust For 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.