Correlation Between Equity Growth and High-yield Municipal
Can any of the company-specific risk be diversified away by investing in both Equity Growth and High-yield 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 Equity Growth and High-yield Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Growth Fund and High Yield Municipal Fund, you can compare the effects of market volatilities on Equity Growth and High-yield 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 Equity Growth with a short position of High-yield Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Growth and High-yield Municipal.
Diversification Opportunities for Equity Growth and High-yield Municipal
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Equity and High-yield is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Equity Growth Fund and High Yield Municipal Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Yield Municipal and Equity Growth 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 Equity Growth Fund are associated (or correlated) with High-yield Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Yield Municipal has no effect on the direction of Equity Growth i.e., Equity Growth and High-yield Municipal go up and down completely randomly.
Pair Corralation between Equity Growth and High-yield Municipal
Assuming the 90 days horizon Equity Growth Fund is expected to generate 2.16 times more return on investment than High-yield Municipal. However, Equity Growth is 2.16 times more volatile than High Yield Municipal Fund. It trades about 0.39 of its potential returns per unit of risk. High Yield Municipal Fund is currently generating about 0.18 per unit of risk. If you would invest 3,268 in Equity Growth Fund on September 5, 2024 and sell it today you would earn a total of 209.00 from holding Equity Growth Fund or generate 6.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equity Growth Fund vs. High Yield Municipal Fund
Performance |
| Timeline |
| Equity Growth |
| High Yield Municipal |
Equity Growth and High-yield Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Growth and High-yield Municipal
The main advantage of trading using opposite Equity Growth and High-yield Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Growth position performs unexpectedly, High-yield 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 High-yield Municipal will offset losses from the drop in High-yield Municipal's long position.| Equity Growth vs. Income Growth Fund | Equity Growth vs. Equity Income Fund | Equity Growth vs. International Growth Fund | Equity Growth vs. Value Fund Investor |
| High-yield Municipal vs. Rbb Fund | High-yield Municipal vs. Vanguard Windsor Fund | High-yield Municipal vs. Small Cap Stock | High-yield Municipal vs. Growth Strategy 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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