Correlation Between Invesco Advantage and Thornburg Income

Can any of the company-specific risk be diversified away by investing in both Invesco Advantage and Thornburg Income 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 Thornburg Income 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 Thornburg Income Builder, you can compare the effects of market volatilities on Invesco Advantage and Thornburg Income 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 Thornburg Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Advantage and Thornburg Income.

Diversification Opportunities for Invesco Advantage and Thornburg Income

0.7

Correlation Coefficient

Invesco Advantage  Thornburg Income

Poor diversification

The 3 months correlation between Invesco and Thornburg is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Advantage MIT and Thornburg Income Builder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg Income Builder 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 Thornburg Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg Income Builder has no effect on the direction of Invesco Advantage i.e., Invesco Advantage and Thornburg Income go up and down completely randomly.

Pair Corralation between Invesco Advantage and Thornburg Income

Considering the 90-day investment horizon Invesco Advantage MIT is expected to under-perform the Thornburg Income. In addition to that, Invesco Advantage is 1.04 times more volatile than Thornburg Income Builder. It trades about -0.01 of its total potential returns per unit of risk. Thornburg Income Builder is currently generating about 0.11 per unit of volatility. If you would invest  1,678  in Thornburg Income Builder on December 2, 2024 and sell it today you would earn a total of  72.00  from holding Thornburg Income Builder or generate 4.29% 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.  Thornburg Income Builder

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.

Thornburg Income Builder

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thornburg Income Builder are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Thornburg Income is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Invesco Advantage and Thornburg Income

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

The idea behind Invesco Advantage MIT and Thornburg Income Builder 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.