Correlation Between High-yield Municipal and Dimensional Emerging
Can any of the company-specific risk be diversified away by investing in both High-yield Municipal and Dimensional Emerging 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 Dimensional Emerging 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 Dimensional Emerging Core, you can compare the effects of market volatilities on High-yield Municipal and Dimensional Emerging 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 Dimensional Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of High-yield Municipal and Dimensional Emerging.
Diversification Opportunities for High-yield Municipal and Dimensional Emerging
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between High-yield and Dimensional is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund and Dimensional Emerging Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Emerging Core 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 Dimensional Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Emerging Core has no effect on the direction of High-yield Municipal i.e., High-yield Municipal and Dimensional Emerging go up and down completely randomly.
Pair Corralation between High-yield Municipal and Dimensional Emerging
Assuming the 90 days horizon High Yield Municipal Fund is expected to generate 0.4 times more return on investment than Dimensional Emerging. However, High Yield Municipal Fund is 2.52 times less risky than Dimensional Emerging. It trades about 0.14 of its potential returns per unit of risk. Dimensional Emerging Core is currently generating about -0.15 per unit of risk. If you would invest 885.00 in High Yield Municipal Fund on August 25, 2024 and sell it today you would earn a total of 11.00 from holding High Yield Municipal Fund or generate 1.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
High Yield Municipal Fund vs. Dimensional Emerging Core
Performance |
| Timeline |
| High Yield Municipal |
| Dimensional Emerging Core |
High-yield Municipal and Dimensional Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with High-yield Municipal and Dimensional Emerging
The main advantage of trading using opposite High-yield Municipal and Dimensional Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High-yield Municipal position performs unexpectedly, Dimensional Emerging 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 Dimensional Emerging will offset losses from the drop in Dimensional Emerging's long position.| High-yield Municipal vs. Munivest Fund | High-yield Municipal vs. Blackrock Muniholdings Quality | High-yield Municipal vs. DWS Municipal Income | High-yield Municipal vs. Blackrock Muniholdings Closed |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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