Correlation Between Invesco Municipal and Fidelity Managed

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Can any of the company-specific risk be diversified away by investing in both Invesco Municipal and Fidelity Managed 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 Fidelity Managed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco Municipal Income and Fidelity Managed Retirement, you can compare the effects of market volatilities on Invesco Municipal and Fidelity Managed 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 Fidelity Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Municipal and Fidelity Managed.

Diversification Opportunities for Invesco Municipal and Fidelity Managed

0.76
  Correlation Coefficient

Poor diversification

The 3 months correlation between Invesco and Fidelity is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Municipal Income and Fidelity Managed Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Managed Ret 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 Income are associated (or correlated) with Fidelity Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Managed Ret has no effect on the direction of Invesco Municipal i.e., Invesco Municipal and Fidelity Managed go up and down completely randomly.

Pair Corralation between Invesco Municipal and Fidelity Managed

Assuming the 90 days horizon Invesco Municipal Income is expected to under-perform the Fidelity Managed. But the mutual fund apears to be less risky and, when comparing its historical volatility, Invesco Municipal Income is 1.17 times less risky than Fidelity Managed. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Fidelity Managed Retirement is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  5,432  in Fidelity Managed Retirement on September 26, 2024 and sell it today you would lose (28.00) from holding Fidelity Managed Retirement or give up 0.52% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Invesco Municipal Income  vs.  Fidelity Managed Retirement

 Performance 
       Timeline  
Invesco Municipal Income 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Invesco Municipal Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly 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.
Fidelity Managed Ret 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Fidelity Managed Retirement has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Fidelity Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco Municipal and Fidelity Managed Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Invesco Municipal and Fidelity Managed

The main advantage of trading using opposite Invesco Municipal and Fidelity Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Municipal position performs unexpectedly, Fidelity Managed 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 Fidelity Managed will offset losses from the drop in Fidelity Managed's long position.
The idea behind Invesco Municipal Income and Fidelity Managed Retirement 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.

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