Correlation Between National Tax and Floating Rate
Can any of the company-specific risk be diversified away by investing in both National Tax and Floating Rate 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 National Tax and Floating Rate 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 Floating Rate Fund, you can compare the effects of market volatilities on National Tax and Floating Rate 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 National Tax with a short position of Floating Rate. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Tax and Floating Rate.
Diversification Opportunities for National Tax and Floating Rate
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between National and Floating is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding The National Tax Free and Floating Rate Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Floating Rate and National Tax 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 Floating Rate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Floating Rate has no effect on the direction of National Tax i.e., National Tax and Floating Rate go up and down completely randomly.
Pair Corralation between National Tax and Floating Rate
Assuming the 90 days horizon National Tax is expected to generate 4.05 times less return on investment than Floating Rate. In addition to that, National Tax is 1.08 times more volatile than Floating Rate Fund. It trades about 0.05 of its total potential returns per unit of risk. Floating Rate Fund is currently generating about 0.22 per unit of volatility. If you would invest 753.00 in Floating Rate Fund on September 14, 2024 and sell it today you would earn a total of 66.00 from holding Floating Rate Fund or generate 8.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The National Tax Free vs. Floating Rate Fund
Performance |
| Timeline |
| National Tax |
| Floating Rate |
National Tax and Floating Rate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Tax and Floating Rate
The main advantage of trading using opposite National Tax and Floating Rate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Tax position performs unexpectedly, Floating Rate 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 Floating Rate will offset losses from the drop in Floating Rate's long position.| National Tax vs. The Missouri Tax Free | National Tax vs. The Bond Fund | National Tax vs. High Yield Municipal Fund | National Tax vs. Fidelity Intermediate Municipal |
| Floating Rate vs. Mid Cap 15x Strategy | Floating Rate vs. Transamerica Emerging Markets | Floating Rate vs. Origin Emerging Markets | Floating Rate vs. Shelton Emerging Markets |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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