Correlation Between Invesco Municipal and Franklin Federal
Can any of the company-specific risk be diversified away by investing in both Invesco Municipal and Franklin Federal 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 Franklin Federal 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 Franklin Federal Tax Free, you can compare the effects of market volatilities on Invesco Municipal and Franklin Federal 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 Franklin Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Municipal and Franklin Federal.
Diversification Opportunities for Invesco Municipal and Franklin Federal
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Invesco and Franklin is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Municipal Income and Franklin Federal Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Federal Tax 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 Franklin Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Federal Tax has no effect on the direction of Invesco Municipal i.e., Invesco Municipal and Franklin Federal go up and down completely randomly.
Pair Corralation between Invesco Municipal and Franklin Federal
Assuming the 90 days horizon Invesco Municipal is expected to generate 1.6 times less return on investment than Franklin Federal. But when comparing it to its historical volatility, Invesco Municipal Income is 1.03 times less risky than Franklin Federal. It trades about 0.01 of its potential returns per unit of risk. Franklin Federal Tax Free is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,065 in Franklin Federal Tax Free on January 26, 2024 and sell it today you would earn a total of 3.00 from holding Franklin Federal Tax Free or generate 0.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco Municipal Income vs. Franklin Federal Tax Free
Performance |
| Timeline |
| Invesco Municipal |
| Franklin Federal Tax |
Invesco Municipal and Franklin Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco Municipal and Franklin Federal
The main advantage of trading using opposite Invesco Municipal and Franklin Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Municipal position performs unexpectedly, Franklin Federal 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 Franklin Federal will offset losses from the drop in Franklin Federal's long position.| Invesco Municipal vs. Vanguard Long Term Tax Exempt | Invesco Municipal vs. Vanguard High Yield Tax Exempt | Invesco Municipal vs. Strategic Advisers Municipal |
| Franklin Federal vs. Vanguard Long Term Tax Exempt | Franklin Federal vs. Vanguard High Yield Tax Exempt | Franklin Federal vs. Strategic Advisers Municipal |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
Other Complementary Tools
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets |