Correlation Between High-yield Municipal and The National
Can any of the company-specific risk be diversified away by investing in both High-yield Municipal and The National 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 The National 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 The National Tax Free, you can compare the effects of market volatilities on High-yield Municipal and The National 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 The National. Check out your portfolio center. Please also check ongoing floating volatility patterns of High-yield Municipal and The National.
Diversification Opportunities for High-yield Municipal and The National
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between High-yield and The is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund and The National Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Tax 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 The National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Tax has no effect on the direction of High-yield Municipal i.e., High-yield Municipal and The National go up and down completely randomly.
Pair Corralation between High-yield Municipal and The National
Assuming the 90 days horizon High-yield Municipal is expected to generate 1.82 times less return on investment than The National. In addition to that, High-yield Municipal is 1.48 times more volatile than The National Tax Free. It trades about 0.02 of its total potential returns per unit of risk. The National Tax Free is currently generating about 0.06 per unit of volatility. If you would invest 1,848 in The National Tax Free on October 24, 2024 and sell it today you would earn a total of 4.00 from holding The National Tax Free or generate 0.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
High Yield Municipal Fund vs. The National Tax Free
Performance |
| Timeline |
| High Yield Municipal |
| National Tax |
High-yield Municipal and The National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with High-yield Municipal and The National
The main advantage of trading using opposite High-yield Municipal and The National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High-yield Municipal position performs unexpectedly, The National 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 The National will offset losses from the drop in The National's long position.| High-yield Municipal vs. High Yield Fund Investor | High-yield Municipal vs. Intermediate Term Tax Free Bond | High-yield Municipal vs. California High Yield Municipal | High-yield Municipal vs. T Rowe Price |
| The National vs. The Missouri Tax Free | The National vs. The Bond Fund | The National vs. High Yield Municipal Fund | The National vs. Fidelity Intermediate 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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