Correlation Between Invesco Municipal and Fidelity Tax
Can any of the company-specific risk be diversified away by investing in both Invesco Municipal and Fidelity Tax 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 Fidelity Tax 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 Fidelity Tax Free Bond, you can compare the effects of market volatilities on Invesco Municipal and Fidelity Tax 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 Fidelity Tax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Municipal and Fidelity Tax.
Diversification Opportunities for Invesco Municipal and Fidelity Tax
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Invesco and Fidelity is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Municipal Income and Fidelity Tax Free Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Tax Free 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 Fidelity Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Tax Free has no effect on the direction of Invesco Municipal i.e., Invesco Municipal and Fidelity Tax go up and down completely randomly.
Pair Corralation between Invesco Municipal and Fidelity Tax
Assuming the 90 days horizon Invesco Municipal Income is expected to generate 1.08 times more return on investment than Fidelity Tax. However, Invesco Municipal is 1.08 times more volatile than Fidelity Tax Free Bond. It trades about -0.18 of its potential returns per unit of risk. Fidelity Tax Free Bond is currently generating about -0.24 per unit of risk. If you would invest 1,196 in Invesco Municipal Income on January 26, 2024 and sell it today you would lose (10.00) from holding Invesco Municipal Income or give up 0.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco Municipal Income vs. Fidelity Tax Free Bond
Performance |
| Timeline |
| Invesco Municipal |
| Fidelity Tax Free |
Invesco Municipal and Fidelity Tax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco Municipal and Fidelity Tax
The main advantage of trading using opposite Invesco Municipal and Fidelity Tax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Municipal position performs unexpectedly, Fidelity Tax 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 Fidelity Tax will offset losses from the drop in Fidelity Tax'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 |
| Fidelity Tax vs. Vanguard Long Term Tax Exempt | Fidelity Tax vs. Vanguard High Yield Tax Exempt | Fidelity Tax vs. Vanguard High Yield Tax Exempt | Fidelity Tax 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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