Correlation Between Thunder Bridge and Invesco Municipal

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

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

Diversification Opportunities for Thunder Bridge and Invesco Municipal

-0.66

Correlation Coefficient

Thunder Bridge  Invesco Municipal

Excellent diversification

The 3 months correlation between Thunder and Invesco is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Thunder Bridge Capital and Invesco Municipal Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Municipal Trust and Thunder Bridge 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 Thunder Bridge Capital are associated (or correlated) with Invesco Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Municipal Trust has no effect on the direction of Thunder Bridge i.e., Thunder Bridge and Invesco Municipal go up and down completely randomly.

Pair Corralation between Thunder Bridge and Invesco Municipal

Assuming the 90 days horizon Thunder Bridge Capital is expected to generate 0.73 times more return on investment than Invesco Municipal. However, Thunder Bridge Capital is 1.37 times less risky than Invesco Municipal. It trades about 0.22 of its potential returns per unit of risk. Invesco Municipal Trust is currently generating about 0.16 per unit of risk. If you would invest  1,023  in Thunder Bridge Capital on February 6, 2024 and sell it today you would earn a total of  19.00  from holding Thunder Bridge Capital or generate 1.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Thunder Bridge Capital  vs.  Invesco Municipal Trust

Thunder Bridge Capital

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thunder Bridge Capital are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Thunder Bridge is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Invesco Municipal Trust

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Municipal Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking signals, Invesco Municipal is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Thunder Bridge and Invesco Municipal

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

The idea behind Thunder Bridge Capital and Invesco Municipal Trust 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.

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.