Correlation Between Invesco Municipal and Western Asset
Can any of the company-specific risk be diversified away by investing in both Invesco Municipal and Western Asset 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 Western Asset 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 Western Asset Managed, you can compare the effects of market volatilities on Invesco Municipal and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Municipal and Western Asset.
Diversification Opportunities for Invesco Municipal and Western Asset
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Invesco and Western is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Municipal Income and Western Asset Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Managed 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Managed has no effect on the direction of Invesco Municipal i.e., Invesco Municipal and Western Asset go up and down completely randomly.
Pair Corralation between Invesco Municipal and Western Asset
Assuming the 90 days horizon Invesco Municipal Income is expected to generate 1.16 times more return on investment than Western Asset. However, Invesco Municipal is 1.16 times more volatile than Western Asset Managed. It trades about -0.02 of its potential returns per unit of risk. Western Asset Managed is currently generating about -0.06 per unit of risk. If you would invest 1,189 in Invesco Municipal Income on January 17, 2024 and sell it today you would lose (2.00) from holding Invesco Municipal Income or give up 0.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 97.56% |
| Values | Daily Returns |
Invesco Municipal Income vs. Western Asset Managed
Performance |
| Timeline |
| Invesco Municipal |
| Western Asset Managed |
Invesco Municipal and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco Municipal and Western Asset
The main advantage of trading using opposite Invesco Municipal and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Municipal position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.| Invesco Municipal vs. Oppenheimer Rising Dividends | Invesco Municipal vs. Invesco High Yield | Invesco Municipal vs. Oppenheimer Strategic Income | Invesco Municipal vs. Oppenheimer International Small |
| Western Asset vs. Clearbridge Aggressive Growth | Western Asset vs. Clearbridge Small Cap | Western Asset vs. Qs International Dividend | Western Asset vs. Qs International Dividend |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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