Correlation Between Enhanced and Tax-exempt Bond
Can any of the company-specific risk be diversified away by investing in both Enhanced and Tax-exempt 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 Enhanced and Tax-exempt Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enhanced Large Pany and Tax Exempt Bond Fund, you can compare the effects of market volatilities on Enhanced and Tax-exempt 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 Enhanced with a short position of Tax-exempt Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enhanced and Tax-exempt Bond.
Diversification Opportunities for Enhanced and Tax-exempt Bond
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Enhanced and TAX-EXEMPT is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Enhanced Large Pany and Tax Exempt Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Exempt Bond and Enhanced 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 Enhanced Large Pany are associated (or correlated) with Tax-exempt Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Exempt Bond has no effect on the direction of Enhanced i.e., Enhanced and Tax-exempt Bond go up and down completely randomly.
Pair Corralation between Enhanced and Tax-exempt Bond
Assuming the 90 days horizon Enhanced Large Pany is expected to generate 5.16 times more return on investment than Tax-exempt Bond. However, Enhanced is 5.16 times more volatile than Tax Exempt Bond Fund. It trades about 0.11 of its potential returns per unit of risk. Tax Exempt Bond Fund is currently generating about 0.09 per unit of risk. If you would invest 1,009 in Enhanced Large Pany on August 25, 2024 and sell it today you would earn a total of 537.00 from holding Enhanced Large Pany or generate 53.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enhanced Large Pany vs. Tax Exempt Bond Fund
Performance |
| Timeline |
| Enhanced Large Pany |
| Tax Exempt Bond |
Enhanced and Tax-exempt Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enhanced and Tax-exempt Bond
The main advantage of trading using opposite Enhanced and Tax-exempt Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enhanced position performs unexpectedly, Tax-exempt 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 Tax-exempt Bond will offset losses from the drop in Tax-exempt Bond's long position.| Enhanced vs. Us Micro Cap | Enhanced vs. Dfa Short Term Government | Enhanced vs. Emerging Markets Small | Enhanced vs. Aquagold International |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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