Correlation Between High-yield Municipal and Northern High
Can any of the company-specific risk be diversified away by investing in both High-yield Municipal and Northern High 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 Northern High 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 Northern High Yield, you can compare the effects of market volatilities on High-yield Municipal and Northern High 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 Northern High. Check out your portfolio center. Please also check ongoing floating volatility patterns of High-yield Municipal and Northern High.
Diversification Opportunities for High-yield Municipal and Northern High
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between High-yield and Northern is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund and Northern High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern High Yield 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 Northern High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern High Yield has no effect on the direction of High-yield Municipal i.e., High-yield Municipal and Northern High go up and down completely randomly.
Pair Corralation between High-yield Municipal and Northern High
Assuming the 90 days horizon High Yield Municipal Fund is expected to generate 1.44 times more return on investment than Northern High. However, High-yield Municipal is 1.44 times more volatile than Northern High Yield. It trades about 0.13 of its potential returns per unit of risk. Northern High Yield is currently generating about 0.07 per unit of risk. If you would invest 889.00 in High Yield Municipal Fund on August 29, 2024 and sell it today you would earn a total of 10.00 from holding High Yield Municipal Fund or generate 1.12% 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. Northern High Yield
Performance |
| Timeline |
| High Yield Municipal |
| Northern High Yield |
High-yield Municipal and Northern High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with High-yield Municipal and Northern High
The main advantage of trading using opposite High-yield Municipal and Northern High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High-yield Municipal position performs unexpectedly, Northern High 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 Northern High will offset losses from the drop in Northern High'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 |
| Northern High vs. Northern High Yield | Northern High vs. Northern Tax Exempt Fund | Northern High vs. Northern Intermediate Tax Exempt | Northern High vs. High Yield Municipal Fund |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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