Correlation Between The National and Virginia Bond
Can any of the company-specific risk be diversified away by investing in both The National and Virginia Bond 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 Virginia Bond 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 Virginia Bond Fund, you can compare the effects of market volatilities on The National and Virginia Bond 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 Virginia Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of The National and Virginia Bond.
Diversification Opportunities for The National and Virginia Bond
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between The and Virginia is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding The National Tax Free and Virginia Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virginia Bond 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 Virginia Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virginia Bond has no effect on the direction of The National i.e., The National and Virginia Bond go up and down completely randomly.
Pair Corralation between The National and Virginia Bond
Assuming the 90 days horizon The National is expected to generate 1.98 times less return on investment than Virginia Bond. But when comparing it to its historical volatility, The National Tax Free is 1.42 times less risky than Virginia Bond. It trades about 0.17 of its potential returns per unit of risk. Virginia Bond Fund is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 1,049 in Virginia Bond Fund on September 3, 2024 and sell it today you would earn a total of 19.00 from holding Virginia Bond Fund or generate 1.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The National Tax Free vs. Virginia Bond Fund
Performance |
| Timeline |
| National Tax |
| Virginia Bond |
The National and Virginia Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with The National and Virginia Bond
The main advantage of trading using opposite The National and Virginia Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The National position performs unexpectedly, Virginia Bond 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 Virginia Bond will offset losses from the drop in Virginia Bond'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 |
| Virginia Bond vs. The National Tax Free | Virginia Bond vs. The Missouri Tax Free | Virginia Bond vs. Aquagold International | Virginia Bond vs. Morningstar Unconstrained Allocation |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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