Correlation Between Hawaiian Tax-free and Aquila Three
Can any of the company-specific risk be diversified away by investing in both Hawaiian Tax-free and Aquila Three 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 Hawaiian Tax-free and Aquila Three into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hawaiian Tax Free Trust and Aquila Three Peaks, you can compare the effects of market volatilities on Hawaiian Tax-free and Aquila Three 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 Hawaiian Tax-free with a short position of Aquila Three. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hawaiian Tax-free and Aquila Three.
Diversification Opportunities for Hawaiian Tax-free and Aquila Three
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hawaiian and Aquila is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Hawaiian Tax Free Trust and Aquila Three Peaks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aquila Three Peaks and Hawaiian Tax-free 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 Hawaiian Tax Free Trust are associated (or correlated) with Aquila Three. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aquila Three Peaks has no effect on the direction of Hawaiian Tax-free i.e., Hawaiian Tax-free and Aquila Three go up and down completely randomly.
Pair Corralation between Hawaiian Tax-free and Aquila Three
Assuming the 90 days horizon Hawaiian Tax-free is expected to generate 5.58 times less return on investment than Aquila Three. But when comparing it to its historical volatility, Hawaiian Tax Free Trust is 4.39 times less risky than Aquila Three. It trades about 0.2 of its potential returns per unit of risk. Aquila Three Peaks is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 4,441 in Aquila Three Peaks on September 1, 2024 and sell it today you would earn a total of 226.00 from holding Aquila Three Peaks or generate 5.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Hawaiian Tax Free Trust vs. Aquila Three Peaks
Performance |
| Timeline |
| Hawaiian Tax Free |
| Aquila Three Peaks |
Hawaiian Tax-free and Aquila Three Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hawaiian Tax-free and Aquila Three
The main advantage of trading using opposite Hawaiian Tax-free and Aquila Three positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hawaiian Tax-free position performs unexpectedly, Aquila Three 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 Aquila Three will offset losses from the drop in Aquila Three's long position.The idea behind Hawaiian Tax Free Trust and Aquila Three Peaks 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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