Correlation Between National Tax and American Balanced
Can any of the company-specific risk be diversified away by investing in both National Tax and American Balanced 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 American Balanced 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 American Balanced Fund, you can compare the effects of market volatilities on National Tax and American Balanced 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 American Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Tax and American Balanced.
Diversification Opportunities for National Tax and American Balanced
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between National and American is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding The National Tax Free and American Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Balanced 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 American Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Balanced has no effect on the direction of National Tax i.e., National Tax and American Balanced go up and down completely randomly.
Pair Corralation between National Tax and American Balanced
Assuming the 90 days horizon National Tax is expected to generate 4.33 times less return on investment than American Balanced. But when comparing it to its historical volatility, The National Tax Free is 2.61 times less risky than American Balanced. It trades about 0.06 of its potential returns per unit of risk. American Balanced Fund is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,796 in American Balanced Fund on September 14, 2024 and sell it today you would earn a total of 855.00 from holding American Balanced Fund or generate 30.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The National Tax Free vs. American Balanced Fund
Performance |
| Timeline |
| National Tax |
| American Balanced |
National Tax and American Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Tax and American Balanced
The main advantage of trading using opposite National Tax and American Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Tax position performs unexpectedly, American Balanced 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 American Balanced will offset losses from the drop in American Balanced'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 |
| American Balanced vs. T Rowe Price | American Balanced vs. Multisector Bond Sma | American Balanced vs. The National Tax Free | American Balanced vs. Artisan High Income |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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