Correlation Between Invesco Municipal and Tri Continental

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

Diversification Opportunities for Invesco Municipal and Tri Continental

0.18

Correlation Coefficient

Invesco Municipal  Tri Continental

Average diversification

The 3 months correlation between Invesco and Tri is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Municipal Trust and Tri Continental PFD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tri Continental PFD 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 Tri Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tri Continental PFD has no effect on the direction of Invesco Municipal i.e., Invesco Municipal and Tri Continental go up and down completely randomly.

Pair Corralation between Invesco Municipal and Tri Continental

Considering the 90-day investment horizon Invesco Municipal Trust is expected to generate 0.87 times more return on investment than Tri Continental. However, Invesco Municipal Trust is 1.15 times less risky than Tri Continental. It trades about 0.02 of its potential returns per unit of risk. Tri Continental PFD is currently generating about -0.09 per unit of risk. If you would invest  976.00  in Invesco Municipal Trust on October 23, 2024 and sell it today you would earn a total of  5.00  from holding Invesco Municipal Trust or generate 0.51% return on investment over 90 days.

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

Invesco Municipal Trust  vs.  Tri Continental PFD

Invesco Municipal Trust

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Municipal Trust are ranked lower than 1 (%) 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.

Tri Continental PFD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tri Continental PFD has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Tri Continental is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Invesco Municipal and Tri Continental

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

The idea behind Invesco Municipal Trust and Tri Continental PFD 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.