Correlation Between Cref Money and Invesco Municipal

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Can any of the company-specific risk be diversified away by investing in both Cref Money 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 Cref Money and Invesco Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cref Money Market and Invesco Municipal Income, you can compare the effects of market volatilities on Cref Money 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 Cref Money with a short position of Invesco Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cref Money and Invesco Municipal.

Diversification Opportunities for Cref Money and Invesco Municipal

-0.02
  Correlation Coefficient

Good diversification

The 3 months correlation between Cref and Invesco is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Cref Money Market 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 Cref Money 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 Cref Money Market 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 Cref Money i.e., Cref Money and Invesco Municipal go up and down completely randomly.

Pair Corralation between Cref Money and Invesco Municipal

Assuming the 90 days trading horizon Cref Money is expected to generate 1.01 times less return on investment than Invesco Municipal. But when comparing it to its historical volatility, Cref Money Market is 11.61 times less risky than Invesco Municipal. It trades about 0.8 of its potential returns per unit of risk. Invesco Municipal Income is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,084  in Invesco Municipal Income on September 19, 2024 and sell it today you would earn a total of  113.00  from holding Invesco Municipal Income or generate 10.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy97.18%
ValuesDaily Returns

Cref Money Market  vs.  Invesco Municipal Income

 Performance 
       Timeline  
Cref Money Market 

Risk-Adjusted Performance

79 of 100

 
Weak
 
Strong
Market Crasher
Compared to the overall equity markets, risk-adjusted returns on investments in Cref Money Market are ranked lower than 79 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Cref Money is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Invesco Municipal Income 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 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.

Cref Money and Invesco Municipal Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cref Money and Invesco Municipal

The main advantage of trading using opposite Cref Money and Invesco Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cref Money 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 Cref Money Market 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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