Correlation Between Intermediate Government and Taxable Municipal
Can any of the company-specific risk be diversified away by investing in both Intermediate Government and Taxable Municipal 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 Intermediate Government and Taxable Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intermediate Government Bond and Taxable Municipal Bond, you can compare the effects of market volatilities on Intermediate Government and Taxable Municipal 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 Intermediate Government with a short position of Taxable Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intermediate Government and Taxable Municipal.
Diversification Opportunities for Intermediate Government and Taxable Municipal
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Intermediate and Taxable is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Government Bond and Taxable Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taxable Municipal Bond and Intermediate Government 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 Intermediate Government Bond are associated (or correlated) with Taxable Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taxable Municipal Bond has no effect on the direction of Intermediate Government i.e., Intermediate Government and Taxable Municipal go up and down completely randomly.
Pair Corralation between Intermediate Government and Taxable Municipal
Assuming the 90 days horizon Intermediate Government is expected to generate 1.01 times less return on investment than Taxable Municipal. But when comparing it to its historical volatility, Intermediate Government Bond is 4.52 times less risky than Taxable Municipal. It trades about 0.15 of its potential returns per unit of risk. Taxable Municipal Bond is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 709.00 in Taxable Municipal Bond on August 31, 2024 and sell it today you would earn a total of 43.00 from holding Taxable Municipal Bond or generate 6.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Intermediate Government Bond vs. Taxable Municipal Bond
Performance |
| Timeline |
| Intermediate Government |
| Taxable Municipal Bond |
Intermediate Government and Taxable Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Intermediate Government and Taxable Municipal
The main advantage of trading using opposite Intermediate Government and Taxable Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intermediate Government position performs unexpectedly, Taxable Municipal 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 Taxable Municipal will offset losses from the drop in Taxable Municipal's long position.| Intermediate Government vs. Artisan High Income | Intermediate Government vs. Pioneer High Yield | Intermediate Government vs. Legg Mason Partners | Intermediate Government vs. Fidelity Capital Income |
| Taxable Municipal vs. Tiaa Cref Smallmid Cap Equity | Taxable Municipal vs. Adams Diversified Equity | Taxable Municipal vs. The Gabelli Small | Taxable Municipal vs. Sentinel Small Pany |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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