Correlation Between Invesco Municipal and Transamerica Cleartrack

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

Diversification Opportunities for Invesco Municipal and Transamerica Cleartrack

0.72

Correlation Coefficient

Invesco Municipal  Transamerica Cleartrack

Poor diversification

The 3 months correlation between Invesco and Transamerica is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Municipal Income and Transamerica Cleartrack Retire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Cleartrack 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 Transamerica Cleartrack. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Cleartrack has no effect on the direction of Invesco Municipal i.e., Invesco Municipal and Transamerica Cleartrack go up and down completely randomly.

Pair Corralation between Invesco Municipal and Transamerica Cleartrack

Assuming the 90 days horizon Invesco Municipal Income is expected to under-perform the Transamerica Cleartrack. But the mutual fund apears to be less risky and, when comparing its historical volatility, Invesco Municipal Income is 1.53 times less risky than Transamerica Cleartrack. The mutual fund trades about -0.3 of its potential returns per unit of risk. The Transamerica Cleartrack Retirement is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  835.00  in Transamerica Cleartrack Retirement on September 24, 2024 and sell it today you would lose (12.00) from holding Transamerica Cleartrack Retirement or give up 1.44% of portfolio value over 90 days.

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

Invesco Municipal Income  vs.  Transamerica Cleartrack Retire

Invesco Municipal Income

Risk-Adjusted Performance

0 of 100

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.

Transamerica Cleartrack

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Invesco Municipal and Transamerica Cleartrack

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

The idea behind Invesco Municipal Income and Transamerica Cleartrack 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.