Correlation Between The Bond and High-yield Municipal
Can any of the company-specific risk be diversified away by investing in both The Bond 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 The Bond 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 The Bond Fund and High Yield Municipal Fund, you can compare the effects of market volatilities on The Bond 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 The Bond with a short position of High-yield Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of The Bond and High-yield Municipal.
Diversification Opportunities for The Bond and High-yield Municipal
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between The and High-yield is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding The Bond 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 The Bond 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 The Bond 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 The Bond i.e., The Bond and High-yield Municipal go up and down completely randomly.
Pair Corralation between The Bond and High-yield Municipal
Assuming the 90 days horizon The Bond is expected to generate 1.12 times less return on investment than High-yield Municipal. In addition to that, The Bond is 1.3 times more volatile than High Yield Municipal Fund. It trades about 0.06 of its total potential returns per unit of risk. High Yield Municipal Fund is currently generating about 0.08 per unit of volatility. If you would invest 823.00 in High Yield Municipal Fund on August 28, 2024 and sell it today you would earn a total of 73.00 from holding High Yield Municipal Fund or generate 8.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.72% |
| Values | Daily Returns |
The Bond Fund vs. High Yield Municipal Fund
Performance |
| Timeline |
| Bond Fund |
| High Yield Municipal |
The Bond and High-yield Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with The Bond and High-yield Municipal
The main advantage of trading using opposite The Bond and High-yield Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The Bond 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.| The Bond vs. The Midcap Growth | The Bond vs. The Growth Fund | The Bond vs. The Missouri Tax Free | The Bond vs. The National Tax Free |
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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