Correlation Between Invesco Municipal and Nuveen Variable

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

Diversification Opportunities for Invesco Municipal and Nuveen Variable

0.75

Correlation Coefficient

Invesco Municipal  Nuveen Variable

Poor diversification

The 3 months correlation between Invesco and Nuveen is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Municipal Trust and Nuveen Variable Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Variable Rate 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 Nuveen Variable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Variable Rate has no effect on the direction of Invesco Municipal i.e., Invesco Municipal and Nuveen Variable go up and down completely randomly.

Pair Corralation between Invesco Municipal and Nuveen Variable

Considering the 90-day investment horizon Invesco Municipal is expected to generate 2.42 times less return on investment than Nuveen Variable. In addition to that, Invesco Municipal is 1.1 times more volatile than Nuveen Variable Rate. It trades about 0.03 of its total potential returns per unit of risk. Nuveen Variable Rate is currently generating about 0.08 per unit of volatility. If you would invest  1,813  in Nuveen Variable Rate on December 19, 2024 and sell it today you would earn a total of  50.00  from holding Nuveen Variable Rate or generate 2.76% return on investment over 90 days.

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

Invesco Municipal Trust  vs.  Nuveen Variable Rate

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.

Nuveen Variable Rate

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Variable Rate are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Nuveen Variable is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Invesco Municipal and Nuveen Variable

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

The idea behind Invesco Municipal Trust and Nuveen Variable Rate 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.