Correlation Between Western Acquisition and Invesco Quality

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

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

Diversification Opportunities for Western Acquisition and Invesco Quality

-0.42

Correlation Coefficient

Western Acquisition  Invesco Quality

Very good diversification

The 3 months correlation between Western and Invesco is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Western Acquisition Ventures and Invesco Quality Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Quality Municipal and Western Acquisition 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 Western Acquisition Ventures are associated (or correlated) with Invesco Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Quality Municipal has no effect on the direction of Western Acquisition i.e., Western Acquisition and Invesco Quality go up and down completely randomly.

Pair Corralation between Western Acquisition and Invesco Quality

Assuming the 90 days horizon Western Acquisition Ventures is expected to generate 1.24 times more return on investment than Invesco Quality. However, Western Acquisition is 1.24 times more volatile than Invesco Quality Municipal. It trades about 0.17 of its potential returns per unit of risk. Invesco Quality Municipal is currently generating about 0.09 per unit of risk. If you would invest  1,075  in Western Acquisition Ventures on September 2, 2024 and sell it today you would earn a total of  79.00  from holding Western Acquisition Ventures or generate 7.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Western Acquisition Ventures  vs.  Invesco Quality Municipal

Western Acquisition

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Western Acquisition Ventures are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Western Acquisition may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Invesco Quality Municipal

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Quality Municipal are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Invesco Quality is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Western Acquisition and Invesco Quality

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

The idea behind Western Acquisition Ventures and Invesco Quality 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.