Correlation Between Invesco Advantage and Invesco Municipal

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

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

Diversification Opportunities for Invesco Advantage and Invesco Municipal

0.79

Correlation Coefficient

Invesco Advantage  Invesco Municipal

Poor diversification

The 3 months correlation between Invesco and Invesco is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Advantage MIT 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 Invesco Advantage 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 Advantage MIT 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 Invesco Advantage i.e., Invesco Advantage and Invesco Municipal go up and down completely randomly.

Pair Corralation between Invesco Advantage and Invesco Municipal

Considering the 90-day investment horizon Invesco Advantage MIT is expected to under-perform the Invesco Municipal. But the stock apears to be less risky and, when comparing its historical volatility, Invesco Advantage MIT is 1.27 times less risky than Invesco Municipal. The stock trades about -0.04 of its potential returns per unit of risk. The Invesco Municipal Income is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  578.00  in Invesco Municipal Income on December 29, 2024 and sell it today you would earn a total of  26.00  from holding Invesco Municipal Income or generate 4.5% return on investment over 90 days.

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

Invesco Advantage MIT  vs.  Invesco Municipal Income

Invesco Advantage MIT

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Advantage MIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward-looking signals, Invesco Advantage is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Invesco Municipal Income

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Municipal Income are ranked lower than 8 (%) 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.

Pair Trading with Invesco Advantage and Invesco Municipal

The main advantage of trading using opposite Invesco Advantage and Invesco Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Advantage 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 Invesco Advantage MIT 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.