Correlation Between The National and Floating Rate
Can any of the company-specific risk be diversified away by investing in both The National 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 The National 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 The National 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 The National with a short position of Floating Rate. Check out your portfolio center. Please also check ongoing floating volatility patterns of The National and Floating Rate.
Diversification Opportunities for The National and Floating Rate
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between The and Floating is -0.47. 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 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 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 The National i.e., The National and Floating Rate go up and down completely randomly.
Pair Corralation between The National and Floating Rate
Assuming the 90 days horizon The National Tax Free is expected to generate 2.01 times more return on investment than Floating Rate. However, The National is 2.01 times more volatile than Floating Rate Fund. It trades about 0.15 of its potential returns per unit of risk. Floating Rate Fund is currently generating about 0.22 per unit of risk. If you would invest 1,856 in The National Tax Free on August 29, 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 Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
The National Tax Free vs. Floating Rate Fund
Performance |
| Timeline |
| National Tax |
| Floating Rate |
The National and Floating Rate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with The National and Floating Rate
The main advantage of trading using opposite The National and Floating Rate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The National 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.| 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 |
| Floating Rate vs. Gamco Natural Resources | Floating Rate vs. Ivy Natural Resources | Floating Rate vs. Goldman Sachs Mlp | Floating Rate vs. Franklin 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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