Correlation Between Rand Capital and Invesco Municipal

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

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

Diversification Opportunities for Rand Capital and Invesco Municipal

0.79

Correlation Coefficient

Rand Capital  Invesco Municipal

Poor diversification

The 3 months correlation between Rand and Invesco is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Rand Capital Corp and Invesco Municipal Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Municipal Trust and Rand Capital 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 Rand Capital Corp 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 Trust has no effect on the direction of Rand Capital i.e., Rand Capital and Invesco Municipal go up and down completely randomly.

Pair Corralation between Rand Capital and Invesco Municipal

Given the investment horizon of 90 days Rand Capital Corp is expected to generate 7.6 times more return on investment than Invesco Municipal. However, Rand Capital is 7.6 times more volatile than Invesco Municipal Trust. It trades about 0.05 of its potential returns per unit of risk. Invesco Municipal Trust is currently generating about 0.03 per unit of risk. If you would invest  1,793  in Rand Capital Corp on December 27, 2024 and sell it today you would earn a total of  166.00  from holding Rand Capital Corp or generate 9.26% return on investment over 90 days.

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

Rand Capital Corp  vs.  Invesco Municipal Trust

Rand Capital Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rand Capital Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Rand Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Invesco Municipal Trust

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Municipal Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking signals, Invesco Municipal is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Rand Capital and Invesco Municipal

The main advantage of trading using opposite Rand Capital and Invesco Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rand Capital 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 Rand Capital Corp and Invesco Municipal Trust 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.