Correlation Between Virtus Dfa and Invesco Municipal

Can any of the company-specific risk be diversified away by investing in both Virtus Dfa and Invesco Municipal 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 Virtus Dfa and Invesco Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Virtus Dfa 2040 and Invesco Municipal Income, you can compare the effects of market volatilities on Virtus Dfa and Invesco Municipal 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 Virtus Dfa with a short position of Invesco Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus Dfa and Invesco Municipal.

Diversification Opportunities for Virtus Dfa and Invesco Municipal

0.08

Correlation Coefficient

Virtus Dfa  Invesco Municipal

Significant diversification

The 3 months correlation between Virtus and Invesco is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Dfa 2040 and Invesco Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Municipal Income and Virtus Dfa 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 Virtus Dfa 2040 are associated (or correlated) with Invesco Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Municipal Income has no effect on the direction of Virtus Dfa i.e., Virtus Dfa and Invesco Municipal go up and down completely randomly.

Pair Corralation between Virtus Dfa and Invesco Municipal

Assuming the 90 days horizon Virtus Dfa 2040 is expected to generate 2.09 times more return on investment than Invesco Municipal. However, Virtus Dfa is 2.09 times more volatile than Invesco Municipal Income. It trades about 0.25 of its potential returns per unit of risk. Invesco Municipal Income is currently generating about 0.04 per unit of risk. If you would invest  1,099  in Virtus Dfa 2040 on September 5, 2024 and sell it today you would earn a total of  126.00  from holding Virtus Dfa 2040 or generate 11.46% return on investment over 90 days.

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

Virtus Dfa 2040  vs.  Invesco Municipal Income

Virtus Dfa 2040

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Dfa 2040 are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Virtus Dfa is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco Municipal Income

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Municipal Income are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Invesco Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Virtus Dfa and Invesco Municipal

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

The idea behind Virtus Dfa 2040 and Invesco Municipal Income 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.