Correlation Between Gmo High and Maryland Tax-free
Can any of the company-specific risk be diversified away by investing in both Gmo High and Maryland Tax-free 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 Gmo High and Maryland Tax-free into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gmo High Yield and Maryland Tax Free Bond, you can compare the effects of market volatilities on Gmo High and Maryland Tax-free 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 Gmo High with a short position of Maryland Tax-free. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo High and Maryland Tax-free.
Diversification Opportunities for Gmo High and Maryland Tax-free
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GMO and Maryland is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Gmo High Yield and Maryland Tax Free Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maryland Tax Free and Gmo High 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 Gmo High Yield are associated (or correlated) with Maryland Tax-free. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maryland Tax Free has no effect on the direction of Gmo High i.e., Gmo High and Maryland Tax-free go up and down completely randomly.
Pair Corralation between Gmo High and Maryland Tax-free
Assuming the 90 days horizon Gmo High Yield is expected to generate 0.57 times more return on investment than Maryland Tax-free. However, Gmo High Yield is 1.76 times less risky than Maryland Tax-free. It trades about 0.36 of its potential returns per unit of risk. Maryland Tax Free Bond is currently generating about 0.18 per unit of risk. If you would invest 1,784 in Gmo High Yield on September 3, 2024 and sell it today you would earn a total of 24.00 from holding Gmo High Yield or generate 1.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gmo High Yield vs. Maryland Tax Free Bond
Performance |
| Timeline |
| Gmo High Yield |
| Maryland Tax Free |
Gmo High and Maryland Tax-free Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo High and Maryland Tax-free
The main advantage of trading using opposite Gmo High and Maryland Tax-free positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo High position performs unexpectedly, Maryland Tax-free 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 Maryland Tax-free will offset losses from the drop in Maryland Tax-free's long position.| Gmo High vs. Vanguard High Yield Corporate | Gmo High vs. Vanguard High Yield Porate | Gmo High vs. Blackrock Hi Yld | Gmo High vs. Blackrock High Yield |
| Maryland Tax-free vs. Goldman Sachs Managed | Maryland Tax-free vs. Aqr Managed Futures | Maryland Tax-free vs. Ab Bond Inflation | Maryland Tax-free vs. T Rowe Price |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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