Correlation Between National Tax and Old Westbury
Can any of the company-specific risk be diversified away by investing in both National Tax and Old Westbury 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 Old Westbury 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 Old Westbury Municipal, you can compare the effects of market volatilities on National Tax and Old Westbury 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 Old Westbury. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Tax and Old Westbury.
Diversification Opportunities for National Tax and Old Westbury
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between National and Old is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding The National Tax Free and Old Westbury Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Westbury Municipal 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 Old Westbury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Westbury Municipal has no effect on the direction of National Tax i.e., National Tax and Old Westbury go up and down completely randomly.
Pair Corralation between National Tax and Old Westbury
Assuming the 90 days horizon National Tax is expected to generate 1.05 times less return on investment than Old Westbury. In addition to that, National Tax is 1.0 times more volatile than Old Westbury Municipal. It trades about 0.55 of its total potential returns per unit of risk. Old Westbury Municipal is currently generating about 0.58 per unit of volatility. If you would invest 1,149 in Old Westbury Municipal on September 13, 2024 and sell it today you would earn a total of 13.00 from holding Old Westbury Municipal or generate 1.13% 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. Old Westbury Municipal
Performance |
| Timeline |
| National Tax |
| Old Westbury Municipal |
National Tax and Old Westbury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Tax and Old Westbury
The main advantage of trading using opposite National Tax and Old Westbury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Tax position performs unexpectedly, Old Westbury 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 Old Westbury will offset losses from the drop in Old Westbury'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 |
| Old Westbury vs. Boston Partners Small | Old Westbury vs. Royce Opportunity Fund | Old Westbury vs. Queens Road Small | Old Westbury vs. Lsv Small Cap |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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