Correlation Between High-yield Municipal and Aurania Resources
Can any of the company-specific risk be diversified away by investing in both High-yield Municipal and Aurania Resources 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 High-yield Municipal and Aurania Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between High Yield Municipal Fund and Aurania Resources, you can compare the effects of market volatilities on High-yield Municipal and Aurania Resources 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 High-yield Municipal with a short position of Aurania Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of High-yield Municipal and Aurania Resources.
Diversification Opportunities for High-yield Municipal and Aurania Resources
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between High-yield and Aurania is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund and Aurania Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurania Resources and High-yield 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 High Yield Municipal Fund are associated (or correlated) with Aurania Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurania Resources has no effect on the direction of High-yield Municipal i.e., High-yield Municipal and Aurania Resources go up and down completely randomly.
Pair Corralation between High-yield Municipal and Aurania Resources
Assuming the 90 days horizon High-yield Municipal is expected to generate 26.09 times less return on investment than Aurania Resources. But when comparing it to its historical volatility, High Yield Municipal Fund is 29.64 times less risky than Aurania Resources. It trades about 0.1 of its potential returns per unit of risk. Aurania Resources is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 16.00 in Aurania Resources on August 25, 2024 and sell it today you would earn a total of 18.00 from holding Aurania Resources or generate 112.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
High Yield Municipal Fund vs. Aurania Resources
Performance |
| Timeline |
| High Yield Municipal |
| Aurania Resources |
High-yield Municipal and Aurania Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with High-yield Municipal and Aurania Resources
The main advantage of trading using opposite High-yield Municipal and Aurania Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High-yield Municipal position performs unexpectedly, Aurania Resources 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 Aurania Resources will offset losses from the drop in Aurania Resources' long position.The idea behind High Yield Municipal Fund and Aurania Resources 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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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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