Correlation Between Tax Exempt and Wilmington Municipal
Can any of the company-specific risk be diversified away by investing in both Tax Exempt and Wilmington Municipal 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 Tax Exempt and Wilmington Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tax Exempt Bond and Wilmington Municipal Bond, you can compare the effects of market volatilities on Tax Exempt and Wilmington Municipal 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 Tax Exempt with a short position of Wilmington Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tax Exempt and Wilmington Municipal.
Diversification Opportunities for Tax Exempt and Wilmington Municipal
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Tax and Wilmington is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Tax Exempt Bond and Wilmington Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilmington Municipal Bond and Tax Exempt 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 Tax Exempt Bond are associated (or correlated) with Wilmington Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilmington Municipal Bond has no effect on the direction of Tax Exempt i.e., Tax Exempt and Wilmington Municipal go up and down completely randomly.
Pair Corralation between Tax Exempt and Wilmington Municipal
Assuming the 90 days horizon Tax Exempt Bond is expected to generate 1.18 times more return on investment than Wilmington Municipal. However, Tax Exempt is 1.18 times more volatile than Wilmington Municipal Bond. It trades about 0.07 of its potential returns per unit of risk. Wilmington Municipal Bond is currently generating about 0.05 per unit of risk. If you would invest 1,178 in Tax Exempt Bond on August 29, 2024 and sell it today you would earn a total of 75.00 from holding Tax Exempt Bond or generate 6.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tax Exempt Bond vs. Wilmington Municipal Bond
Performance |
| Timeline |
| Tax Exempt Bond |
| Wilmington Municipal Bond |
Tax Exempt and Wilmington Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tax Exempt and Wilmington Municipal
The main advantage of trading using opposite Tax Exempt and Wilmington Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tax Exempt position performs unexpectedly, Wilmington Municipal 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 Wilmington Municipal will offset losses from the drop in Wilmington Municipal's long position.| Tax Exempt vs. Franklin Federal Tax Free | Tax Exempt vs. Thornburg Limited Term | Tax Exempt vs. T Rowe Price | Tax Exempt vs. Invesco International Growth |
| Wilmington Municipal vs. Wilmington Global Alpha | Wilmington Municipal vs. Wilmington Global Alpha | Wilmington Municipal vs. Wilmington Broad Market | Wilmington Municipal vs. Wilmington Municipal Bond |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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