Correlation Between High-yield Municipal and Kentucky Tax-free
Can any of the company-specific risk be diversified away by investing in both High-yield Municipal and Kentucky Tax-free 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 Kentucky Tax-free 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 Kentucky Tax Free Income, you can compare the effects of market volatilities on High-yield Municipal and Kentucky Tax-free 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 Kentucky Tax-free. Check out your portfolio center. Please also check ongoing floating volatility patterns of High-yield Municipal and Kentucky Tax-free.
Diversification Opportunities for High-yield Municipal and Kentucky Tax-free
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between High-yield and KENTUCKY is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund and Kentucky Tax Free Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kentucky Tax Free 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 Kentucky Tax-free. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kentucky Tax Free has no effect on the direction of High-yield Municipal i.e., High-yield Municipal and Kentucky Tax-free go up and down completely randomly.
Pair Corralation between High-yield Municipal and Kentucky Tax-free
Assuming the 90 days horizon High Yield Municipal Fund is expected to generate 1.26 times more return on investment than Kentucky Tax-free. However, High-yield Municipal is 1.26 times more volatile than Kentucky Tax Free Income. It trades about 0.08 of its potential returns per unit of risk. Kentucky Tax Free Income is currently generating about 0.05 per unit of risk. If you would invest 796.00 in High Yield Municipal Fund on November 19, 2024 and sell it today you would earn a total of 90.00 from holding High Yield Municipal Fund or generate 11.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
High Yield Municipal Fund vs. Kentucky Tax Free Income
Performance |
| Timeline |
| High Yield Municipal |
| Kentucky Tax Free |
High-yield Municipal and Kentucky Tax-free Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with High-yield Municipal and Kentucky Tax-free
The main advantage of trading using opposite High-yield Municipal and Kentucky Tax-free positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High-yield Municipal position performs unexpectedly, Kentucky Tax-free 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 Kentucky Tax-free will offset losses from the drop in Kentucky Tax-free'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 |
| Kentucky Tax-free vs. Barings Active Short | Kentucky Tax-free vs. Pioneer Short Term | Kentucky Tax-free vs. Transam Short Term Bond | Kentucky Tax-free vs. Siit Ultra Short |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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