Correlation Between American Funds and Tax Exempt
Can any of the company-specific risk be diversified away by investing in both American Funds and Tax Exempt 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 Funds and Tax Exempt into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Strategic and Tax Exempt Bond, you can compare the effects of market volatilities on American Funds and Tax Exempt 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 Funds with a short position of Tax Exempt. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Tax Exempt.
Diversification Opportunities for American Funds and Tax Exempt
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Tax is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Strategic and Tax Exempt Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Exempt Bond and American Funds 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 Funds Strategic are associated (or correlated) with Tax Exempt. 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 Bond has no effect on the direction of American Funds i.e., American Funds and Tax Exempt go up and down completely randomly.
Pair Corralation between American Funds and Tax Exempt
Assuming the 90 days horizon American Funds Strategic is expected to generate 1.63 times more return on investment than Tax Exempt. However, American Funds is 1.63 times more volatile than Tax Exempt Bond. It trades about 0.09 of its potential returns per unit of risk. Tax Exempt Bond is currently generating about 0.12 per unit of risk. If you would invest 878.00 in American Funds Strategic on August 24, 2024 and sell it today you would earn a total of 32.00 from holding American Funds Strategic or generate 3.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Strategic vs. Tax Exempt Bond
Performance |
| Timeline |
| American Funds Strategic |
| Tax Exempt Bond |
American Funds and Tax Exempt Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Tax Exempt
The main advantage of trading using opposite American Funds and Tax Exempt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Tax Exempt 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 will offset losses from the drop in Tax Exempt's long position.| American Funds vs. Aam Select Income | American Funds vs. T Rowe Price | American Funds vs. Red Oak Technology | American Funds vs. Balanced Fund Investor |
| Tax Exempt vs. Vanguard Intermediate Term Tax Exempt | Tax Exempt vs. Vanguard Intermediate Term Tax Exempt | Tax Exempt vs. Tax Exempt Bond | Tax Exempt vs. Tax Exempt 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
Other Complementary Tools
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes |