Correlation Between Absolute Strategies and The National
Can any of the company-specific risk be diversified away by investing in both Absolute Strategies and The National 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 Absolute Strategies and The National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Absolute Strategies Fund and The National Tax Free, you can compare the effects of market volatilities on Absolute Strategies and The National 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 Absolute Strategies with a short position of The National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Strategies and The National.
Diversification Opportunities for Absolute Strategies and The National
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Absolute and THE is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Strategies Fund and The National Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Tax and Absolute Strategies 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 Absolute Strategies Fund are associated (or correlated) with The National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Tax has no effect on the direction of Absolute Strategies i.e., Absolute Strategies and The National go up and down completely randomly.
Pair Corralation between Absolute Strategies and The National
Assuming the 90 days horizon Absolute Strategies Fund is expected to under-perform the The National. But the mutual fund apears to be less risky and, when comparing its historical volatility, Absolute Strategies Fund is 3.78 times less risky than The National. The mutual fund trades about -0.41 of its potential returns per unit of risk. The The National Tax Free is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,856 in The National Tax Free on August 28, 2024 and sell it today you would earn a total of 16.00 from holding The National Tax Free or generate 0.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 27.27% |
| Values | Daily Returns |
Absolute Strategies Fund vs. The National Tax Free
Performance |
| Timeline |
| Absolute Strategies |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| National Tax |
Absolute Strategies and The National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Absolute Strategies and The National
The main advantage of trading using opposite Absolute Strategies and The National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Strategies position performs unexpectedly, The National 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 The National will offset losses from the drop in The National's long position.| Absolute Strategies vs. Absolute Convertible Arbitrage | Absolute Strategies vs. Absolute Convertible Arbitrage | Absolute Strategies vs. Schwab Large Cap Growth | Absolute Strategies vs. The Hartford Midcap |
| The National vs. The Missouri Tax Free | The National vs. The Bond Fund | The National vs. High Yield Municipal Fund | The National vs. Fidelity Intermediate Municipal |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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