Correlation Between World Energy and Nebraska Municipal
Can any of the company-specific risk be diversified away by investing in both World Energy and Nebraska 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 World Energy and Nebraska Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between World Energy Fund and Nebraska Municipal Fund, you can compare the effects of market volatilities on World Energy and Nebraska 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 World Energy with a short position of Nebraska Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Energy and Nebraska Municipal.
Diversification Opportunities for World Energy and Nebraska Municipal
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between World and Nebraska is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding World Energy Fund and Nebraska Municipal Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nebraska Municipal and World Energy 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 World Energy Fund are associated (or correlated) with Nebraska Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nebraska Municipal has no effect on the direction of World Energy i.e., World Energy and Nebraska Municipal go up and down completely randomly.
Pair Corralation between World Energy and Nebraska Municipal
Assuming the 90 days horizon World Energy Fund is expected to generate 3.54 times more return on investment than Nebraska Municipal. However, World Energy is 3.54 times more volatile than Nebraska Municipal Fund. It trades about 0.27 of its potential returns per unit of risk. Nebraska Municipal Fund is currently generating about 0.2 per unit of risk. If you would invest 1,426 in World Energy Fund on August 29, 2024 and sell it today you would earn a total of 111.00 from holding World Energy Fund or generate 7.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
World Energy Fund vs. Nebraska Municipal Fund
Performance |
| Timeline |
| World Energy |
| Nebraska Municipal |
World Energy and Nebraska Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with World Energy and Nebraska Municipal
The main advantage of trading using opposite World Energy and Nebraska Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Energy position performs unexpectedly, Nebraska 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 Nebraska Municipal will offset losses from the drop in Nebraska Municipal's long position.| World Energy vs. HUMANA INC | World Energy vs. Aquagold International | World Energy vs. Barloworld Ltd ADR | World Energy vs. Morningstar Unconstrained Allocation |
| Nebraska Municipal vs. Hennessy Bp Energy | Nebraska Municipal vs. World Energy Fund | Nebraska Municipal vs. Oil Gas Ultrasector | Nebraska Municipal vs. Gamco Natural Resources |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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