Correlation Between American High-income and Tax-exempt Fund
Can any of the company-specific risk be diversified away by investing in both American High-income and Tax-exempt Fund 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 American High-income and Tax-exempt Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American High Income Municipal and Tax Exempt Fund Of, you can compare the effects of market volatilities on American High-income and Tax-exempt Fund 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 American High-income with a short position of Tax-exempt Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of American High-income and Tax-exempt Fund.
Diversification Opportunities for American High-income and Tax-exempt Fund
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Tax-exempt is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding American High Income Municipal and Tax Exempt Fund Of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Exempt Fund and American High-income 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 American High Income Municipal are associated (or correlated) with Tax-exempt Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Exempt Fund has no effect on the direction of American High-income i.e., American High-income and Tax-exempt Fund go up and down completely randomly.
Pair Corralation between American High-income and Tax-exempt Fund
Assuming the 90 days horizon American High Income Municipal is expected to generate 1.19 times more return on investment than Tax-exempt Fund. However, American High-income is 1.19 times more volatile than Tax Exempt Fund Of. It trades about 0.17 of its potential returns per unit of risk. Tax Exempt Fund Of is currently generating about 0.11 per unit of risk. If you would invest 1,465 in American High Income Municipal on August 24, 2024 and sell it today you would earn a total of 79.00 from holding American High Income Municipal or generate 5.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American High Income Municipal vs. Tax Exempt Fund Of
Performance |
| Timeline |
| American High Income |
| Tax Exempt Fund |
American High-income and Tax-exempt Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American High-income and Tax-exempt Fund
The main advantage of trading using opposite American High-income and Tax-exempt Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American High-income position performs unexpectedly, Tax-exempt Fund 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 Tax-exempt Fund will offset losses from the drop in Tax-exempt Fund's long position.| American High-income vs. Nuveen All American Municipal | American High-income vs. Invesco High Yield | American High-income vs. Nuveen High Yield | American High-income vs. HUMANA INC |
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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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