Correlation Between Invesco Trust and Nuveen Pennsylvania

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

By analyzing existing cross correlation between Invesco Trust For and Nuveen Pennsylvania Quality, you can compare the effects of market volatilities on Invesco Trust and Nuveen Pennsylvania 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 Trust with a short position of Nuveen Pennsylvania. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Trust and Nuveen Pennsylvania.

Diversification Opportunities for Invesco Trust and Nuveen Pennsylvania

0.8

Correlation Coefficient

Invesco Trust  Nuveen Pennsylvania

Very poor diversification

The 3 months correlation between Invesco and Nuveen is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Trust For and Nuveen Pennsylvania Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Pennsylvania and Invesco Trust 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 Trust For are associated (or correlated) with Nuveen Pennsylvania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Pennsylvania has no effect on the direction of Invesco Trust i.e., Invesco Trust and Nuveen Pennsylvania go up and down completely randomly.

Pair Corralation between Invesco Trust and Nuveen Pennsylvania

Considering the 90-day investment horizon Invesco Trust For is expected to under-perform the Nuveen Pennsylvania. In addition to that, Invesco Trust is 1.16 times more volatile than Nuveen Pennsylvania Quality. It trades about -0.12 of its total potential returns per unit of risk. Nuveen Pennsylvania Quality is currently generating about -0.01 per unit of volatility. If you would invest  1,177  in Nuveen Pennsylvania Quality on November 29, 2024 and sell it today you would lose (6.00) from holding Nuveen Pennsylvania Quality or give up 0.51% of portfolio value over 90 days.

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

Invesco Trust For  vs.  Nuveen Pennsylvania Quality

Invesco Trust For

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Trust For has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Invesco Trust is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Nuveen Pennsylvania

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nuveen Pennsylvania Quality has generated negative risk-adjusted returns adding no value to fund investors. Even with relatively invariable basic indicators, Nuveen Pennsylvania is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Invesco Trust and Nuveen Pennsylvania

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

The idea behind Invesco Trust For and Nuveen Pennsylvania Quality 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.

Check out your portfolio center.

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.