Correlation Between Invesco Municipal and Angel Oak

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

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

Diversification Opportunities for Invesco Municipal and Angel Oak

0.73

Correlation Coefficient

Invesco Municipal  Angel Oak

Poor diversification

The 3 months correlation between Invesco and Angel is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Municipal Trust and Angel Oak Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Angel Oak Financial and Invesco Municipal 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 Municipal Trust are associated (or correlated) with Angel Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Angel Oak Financial has no effect on the direction of Invesco Municipal i.e., Invesco Municipal and Angel Oak go up and down completely randomly.

Pair Corralation between Invesco Municipal and Angel Oak

Considering the 90-day investment horizon Invesco Municipal is expected to generate 4.33 times less return on investment than Angel Oak. In addition to that, Invesco Municipal is 1.1 times more volatile than Angel Oak Financial. It trades about 0.04 of its total potential returns per unit of risk. Angel Oak Financial is currently generating about 0.17 per unit of volatility. If you would invest  1,256  in Angel Oak Financial on December 19, 2024 and sell it today you would earn a total of  74.00  from holding Angel Oak Financial or generate 5.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Invesco Municipal Trust  vs.  Angel Oak Financial

Invesco Municipal Trust

Risk-Adjusted Performance

Weak

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.

Angel Oak Financial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Angel Oak Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Angel Oak is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Invesco Municipal and Angel Oak

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

The idea behind Invesco Municipal Trust and Angel Oak Financial 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.

Check out your portfolio center.

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.