Correlation Between Invesco New and VanEck CEF

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

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

Diversification Opportunities for Invesco New and VanEck CEF

0.72

Correlation Coefficient

Invesco New  VanEck CEF

Poor diversification

The 3 months correlation between Invesco and VanEck is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Invesco New York and VanEck CEF Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck CEF Municipal and Invesco New 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 New York are associated (or correlated) with VanEck CEF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck CEF Municipal has no effect on the direction of Invesco New i.e., Invesco New and VanEck CEF go up and down completely randomly.

Pair Corralation between Invesco New and VanEck CEF

Considering the 90-day investment horizon Invesco New York is expected to under-perform the VanEck CEF. In addition to that, Invesco New is 1.17 times more volatile than VanEck CEF Municipal. It trades about -0.02 of its total potential returns per unit of risk. VanEck CEF Municipal is currently generating about 0.08 per unit of volatility. If you would invest  2,121  in VanEck CEF Municipal on December 19, 2024 and sell it today you would earn a total of  42.00  from holding VanEck CEF Municipal or generate 1.98% return on investment over 90 days.

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

Invesco New York  vs.  VanEck CEF Municipal

Invesco New York

Risk-Adjusted Performance

Very Weak

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

VanEck CEF Municipal

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck CEF Municipal are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, VanEck CEF is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Invesco New and VanEck CEF

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

The idea behind Invesco New York and VanEck CEF Municipal 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.