Correlation Between Invesco Municipal and Invesco Amt-free

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

Diversification Opportunities for Invesco Municipal and Invesco Amt-free

InvescoInvescoDiversified AwayInvescoInvescoDiversified Away100%
0.73
  Correlation Coefficient

Poor diversification

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

Pair Corralation between Invesco Municipal and Invesco Amt-free

Assuming the 90 days horizon Invesco Municipal Income is expected to generate 0.89 times more return on investment than Invesco Amt-free. However, Invesco Municipal Income is 1.12 times less risky than Invesco Amt-free. It trades about -0.06 of its potential returns per unit of risk. Invesco Amt Free Municipal is currently generating about -0.06 per unit of risk. If you would invest  1,209  in Invesco Municipal Income on October 8, 2024 and sell it today you would lose (13.00) from holding Invesco Municipal Income or give up 1.08% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Invesco Municipal Income  vs.  Invesco Amt Free Municipal

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -3-2-1012
JavaScript chart by amCharts 3.21.15VMIIX IORAX
       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.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan11.911.951212.0512.112.15
Invesco Amt Free 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Invesco Amt Free Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Invesco Amt-free is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan6.86.856.96.957

Invesco Municipal and Invesco Amt-free Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-0.41-0.21-0.0822-0.0411-0.004110.03270.07110.140.340.54 1234
JavaScript chart by amCharts 3.21.15VMIIX IORAX
       Returns  

Pair Trading with Invesco Municipal and Invesco Amt-free

The main advantage of trading using opposite Invesco Municipal and Invesco Amt-free positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Municipal position performs unexpectedly, Invesco Amt-free 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 Invesco Amt-free will offset losses from the drop in Invesco Amt-free's long position.
The idea behind Invesco Municipal Income and Invesco Amt Free Municipal 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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