Correlation Between Invesco Trust and Blackrock Muniholdings

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

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

Diversification Opportunities for Invesco Trust and Blackrock Muniholdings

0.91

Correlation Coefficient

Invesco Trust  Blackrock Muniholdings

Almost no diversification

The 3 months correlation between Invesco and Blackrock is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Trust For and Blackrock Muniholdings Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Muniholdings and Invesco Trust 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 Trust For are associated (or correlated) with Blackrock Muniholdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Muniholdings has no effect on the direction of Invesco Trust i.e., Invesco Trust and Blackrock Muniholdings go up and down completely randomly.

Pair Corralation between Invesco Trust and Blackrock Muniholdings

Considering the 90-day investment horizon Invesco Trust is expected to generate 1.24 times less return on investment than Blackrock Muniholdings. But when comparing it to its historical volatility, Invesco Trust For is 1.27 times less risky than Blackrock Muniholdings. It trades about 0.01 of its potential returns per unit of risk. Blackrock Muniholdings Closed is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,261  in Blackrock Muniholdings Closed on September 12, 2024 and sell it today you would earn a total of  1.00  from holding Blackrock Muniholdings Closed or generate 0.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Invesco Trust For  vs.  Blackrock Muniholdings Closed

Invesco Trust For

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Trust For has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Blackrock Muniholdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blackrock Muniholdings Closed has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound technical indicators, Blackrock Muniholdings is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Invesco Trust and Blackrock Muniholdings

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

The idea behind Invesco Trust For and Blackrock Muniholdings Closed 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.