Correlation Between Western Asset and Invesco Us

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

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

Diversification Opportunities for Western Asset and Invesco Us

-0.09

Correlation Coefficient

Western Asset  Invesco Us

Good diversification

The 3 months correlation between Western and Invesco is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal and Invesco Government Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Government and Western Asset 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 Asset Municipal are associated (or correlated) with Invesco Us. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Government has no effect on the direction of Western Asset i.e., Western Asset and Invesco Us go up and down completely randomly.

Pair Corralation between Western Asset and Invesco Us

Assuming the 90 days horizon Western Asset Municipal is expected to under-perform the Invesco Us. In addition to that, Western Asset is 2.21 times more volatile than Invesco Government Fund. It trades about -0.13 of its total potential returns per unit of risk. Invesco Government Fund is currently generating about 0.1 per unit of volatility. If you would invest  690.00  in Invesco Government Fund on October 5, 2024 and sell it today you would earn a total of  6.00  from holding Invesco Government Fund or generate 0.87% return on investment over 90 days.

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

Western Asset Municipal  vs.  Invesco Government Fund

Western Asset Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Invesco Government

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Government Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Invesco Us is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Western Asset and Invesco Us

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

The idea behind Western Asset Municipal and Invesco Government Fund 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.