Correlation Between The National and Kansas Municipal
Can any of the company-specific risk be diversified away by investing in both The National and Kansas 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 National and Kansas Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The National Tax Free and Kansas Municipal Fund, you can compare the effects of market volatilities on The National and Kansas 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 National with a short position of Kansas Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of The National and Kansas Municipal.
Diversification Opportunities for The National and Kansas Municipal
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between The and Kansas is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding The National Tax Free and Kansas Municipal Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kansas Municipal and The National 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 National Tax Free are associated (or correlated) with Kansas Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kansas Municipal has no effect on the direction of The National i.e., The National and Kansas Municipal go up and down completely randomly.
Pair Corralation between The National and Kansas Municipal
Assuming the 90 days horizon The National Tax Free is expected to generate 0.82 times more return on investment than Kansas Municipal. However, The National Tax Free is 1.21 times less risky than Kansas Municipal. It trades about 0.04 of its potential returns per unit of risk. Kansas Municipal Fund is currently generating about -0.07 per unit of risk. If you would invest 1,858 in The National Tax Free on November 3, 2024 and sell it today you would earn a total of 3.00 from holding The National Tax Free or generate 0.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The National Tax Free vs. Kansas Municipal Fund
Performance |
| Timeline |
| National Tax |
| Kansas Municipal |
The National and Kansas Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with The National and Kansas Municipal
The main advantage of trading using opposite The National and Kansas Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The National position performs unexpectedly, Kansas 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 Kansas Municipal will offset losses from the drop in Kansas Municipal's long position.| 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 |
| Kansas Municipal vs. Abbey Capital Futures | Kansas Municipal vs. Asg Managed Futures | Kansas Municipal vs. Ab Bond Inflation | Kansas Municipal vs. Credit Suisse Multialternative |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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