Correlation Between Commonwealth Global and Municipal Total
Can any of the company-specific risk be diversified away by investing in both Commonwealth Global and Municipal Total 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 Commonwealth Global and Municipal Total into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Global Fund and Municipal Total Return, you can compare the effects of market volatilities on Commonwealth Global and Municipal Total 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 Commonwealth Global with a short position of Municipal Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Global and Municipal Total.
Diversification Opportunities for Commonwealth Global and Municipal Total
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Commonwealth and Municipal is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Global Fund and Municipal Total Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Municipal Total Return and Commonwealth Global 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 Commonwealth Global Fund are associated (or correlated) with Municipal Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Municipal Total Return has no effect on the direction of Commonwealth Global i.e., Commonwealth Global and Municipal Total go up and down completely randomly.
Pair Corralation between Commonwealth Global and Municipal Total
Assuming the 90 days horizon Commonwealth Global Fund is expected to generate 3.38 times more return on investment than Municipal Total. However, Commonwealth Global is 3.38 times more volatile than Municipal Total Return. It trades about 0.06 of its potential returns per unit of risk. Municipal Total Return is currently generating about 0.1 per unit of risk. If you would invest 1,867 in Commonwealth Global Fund on August 31, 2024 and sell it today you would earn a total of 298.00 from holding Commonwealth Global Fund or generate 15.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Global Fund vs. Municipal Total Return
Performance |
| Timeline |
| Commonwealth Global |
| Municipal Total Return |
Commonwealth Global and Municipal Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Global and Municipal Total
The main advantage of trading using opposite Commonwealth Global and Municipal Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Global position performs unexpectedly, Municipal Total 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 Municipal Total will offset losses from the drop in Municipal Total's long position.The idea behind Commonwealth Global Fund and Municipal Total Return pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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