Correlation Between Hawaiian Tax-free and High-yield Municipal
Can any of the company-specific risk be diversified away by investing in both Hawaiian Tax-free and High-yield 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 Hawaiian Tax-free and High-yield Municipal 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 High Yield Municipal Fund, you can compare the effects of market volatilities on Hawaiian Tax-free and High-yield 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 Hawaiian Tax-free with a short position of High-yield Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hawaiian Tax-free and High-yield Municipal.
Diversification Opportunities for Hawaiian Tax-free and High-yield Municipal
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hawaiian and High-yield is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Hawaiian Tax Free Trust and High Yield Municipal Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Yield Municipal 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 High-yield Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Yield Municipal has no effect on the direction of Hawaiian Tax-free i.e., Hawaiian Tax-free and High-yield Municipal go up and down completely randomly.
Pair Corralation between Hawaiian Tax-free and High-yield Municipal
Assuming the 90 days horizon Hawaiian Tax-free is expected to generate 1.64 times less return on investment than High-yield Municipal. But when comparing it to its historical volatility, Hawaiian Tax Free Trust is 1.79 times less risky than High-yield Municipal. It trades about 0.16 of its potential returns per unit of risk. High Yield Municipal Fund is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 885.00 in High Yield Municipal Fund on August 25, 2024 and sell it today you would earn a total of 11.00 from holding High Yield Municipal Fund or generate 1.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hawaiian Tax Free Trust vs. High Yield Municipal Fund
Performance |
| Timeline |
| Hawaiian Tax Free |
| High Yield Municipal |
Hawaiian Tax-free and High-yield Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hawaiian Tax-free and High-yield Municipal
The main advantage of trading using opposite Hawaiian Tax-free and High-yield Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hawaiian Tax-free position performs unexpectedly, High-yield 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 High-yield Municipal will offset losses from the drop in High-yield Municipal's long position.| Hawaiian Tax-free vs. Us Government Securities | Hawaiian Tax-free vs. Lord Abbett Government | Hawaiian Tax-free vs. Fidelity Series Government | Hawaiian Tax-free vs. Franklin Adjustable Government |
| High-yield Municipal vs. Munivest Fund | High-yield Municipal vs. Blackrock Muniholdings Quality | High-yield Municipal vs. DWS Municipal Income | High-yield Municipal vs. Blackrock Muniholdings Closed |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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