Correlation Between Taxable Municipal and Kentucky Tax
Can any of the company-specific risk be diversified away by investing in both Taxable Municipal and Kentucky Tax 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 Taxable Municipal and Kentucky Tax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taxable Municipal Bond and Kentucky Tax Free Income, you can compare the effects of market volatilities on Taxable Municipal and Kentucky Tax 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 Taxable Municipal with a short position of Kentucky Tax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taxable Municipal and Kentucky Tax.
Diversification Opportunities for Taxable Municipal and Kentucky Tax
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Taxable and Kentucky is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Taxable Municipal Bond and Kentucky Tax Free Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kentucky Tax Free and Taxable Municipal 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 Taxable Municipal Bond are associated (or correlated) with Kentucky Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kentucky Tax Free has no effect on the direction of Taxable Municipal i.e., Taxable Municipal and Kentucky Tax go up and down completely randomly.
Pair Corralation between Taxable Municipal and Kentucky Tax
Assuming the 90 days horizon Taxable Municipal Bond is expected to generate 1.69 times more return on investment than Kentucky Tax. However, Taxable Municipal is 1.69 times more volatile than Kentucky Tax Free Income. It trades about 0.09 of its potential returns per unit of risk. Kentucky Tax Free Income is currently generating about 0.06 per unit of risk. If you would invest 726.00 in Taxable Municipal Bond on October 25, 2024 and sell it today you would earn a total of 5.00 from holding Taxable Municipal Bond or generate 0.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.74% |
| Values | Daily Returns |
Taxable Municipal Bond vs. Kentucky Tax Free Income
Performance |
| Timeline |
| Taxable Municipal Bond |
| Kentucky Tax Free |
Taxable Municipal and Kentucky Tax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taxable Municipal and Kentucky Tax
The main advantage of trading using opposite Taxable Municipal and Kentucky Tax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taxable Municipal position performs unexpectedly, Kentucky Tax 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 Kentucky Tax will offset losses from the drop in Kentucky Tax's long position.| Taxable Municipal vs. Calvert International Equity | Taxable Municipal vs. T Rowe Price | Taxable Municipal vs. Enhanced Fixed Income | Taxable Municipal vs. Siit Equity Factor |
| Kentucky Tax vs. Colorado Bondshares A | Kentucky Tax vs. Virginia Bond Fund | Kentucky Tax vs. Hawaiian Tax Free Trust | Kentucky Tax vs. Hawaiian Tax Free Trust |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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