Correlation Between Hawaiian Tax-free and American Independence
Can any of the company-specific risk be diversified away by investing in both Hawaiian Tax-free and American Independence 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 American Independence 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 American Independence Kansas, you can compare the effects of market volatilities on Hawaiian Tax-free and American Independence 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 American Independence. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hawaiian Tax-free and American Independence.
Diversification Opportunities for Hawaiian Tax-free and American Independence
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Hawaiian and American is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Hawaiian Tax Free Trust and American Independence Kansas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Independence 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 American Independence. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Independence has no effect on the direction of Hawaiian Tax-free i.e., Hawaiian Tax-free and American Independence go up and down completely randomly.
Pair Corralation between Hawaiian Tax-free and American Independence
Assuming the 90 days horizon Hawaiian Tax-free is expected to generate 1.05 times less return on investment than American Independence. But when comparing it to its historical volatility, Hawaiian Tax Free Trust is 1.05 times less risky than American Independence. It trades about 0.16 of its potential returns per unit of risk. American Independence Kansas is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,007 in American Independence Kansas on August 29, 2024 and sell it today you would earn a total of 8.00 from holding American Independence Kansas or generate 0.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hawaiian Tax Free Trust vs. American Independence Kansas
Performance |
| Timeline |
| Hawaiian Tax Free |
| American Independence |
Hawaiian Tax-free and American Independence Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hawaiian Tax-free and American Independence
The main advantage of trading using opposite Hawaiian Tax-free and American Independence positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hawaiian Tax-free position performs unexpectedly, American Independence 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 American Independence will offset losses from the drop in American Independence's long position.| Hawaiian Tax-free vs. Aquila Three Peaks | Hawaiian Tax-free vs. Aquila Three Peaks | Hawaiian Tax-free vs. Aquila Three Peaks | Hawaiian Tax-free vs. Aquila Three Peaks |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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