Correlation Between Kentucky Tax-free and Us Government
Can any of the company-specific risk be diversified away by investing in both Kentucky Tax-free and Us Government 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 Kentucky Tax-free and Us Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kentucky Tax Free Short To Medium and Us Government Plus, you can compare the effects of market volatilities on Kentucky Tax-free and Us Government 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 Kentucky Tax-free with a short position of Us Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kentucky Tax-free and Us Government.
Diversification Opportunities for Kentucky Tax-free and Us Government
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Kentucky and GVPSX is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Kentucky Tax Free Short To Med and Us Government Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Government Plus and Kentucky 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 Kentucky Tax Free Short To Medium are associated (or correlated) with Us Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Government Plus has no effect on the direction of Kentucky Tax-free i.e., Kentucky Tax-free and Us Government go up and down completely randomly.
Pair Corralation between Kentucky Tax-free and Us Government
Assuming the 90 days horizon Kentucky Tax Free Short To Medium is expected to generate 0.1 times more return on investment than Us Government. However, Kentucky Tax Free Short To Medium is 10.05 times less risky than Us Government. It trades about 0.05 of its potential returns per unit of risk. Us Government Plus is currently generating about -0.03 per unit of risk. If you would invest 496.00 in Kentucky Tax Free Short To Medium on October 7, 2024 and sell it today you would earn a total of 16.00 from holding Kentucky Tax Free Short To Medium or generate 3.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kentucky Tax Free Short To Med vs. Us Government Plus
Performance |
| Timeline |
| Kentucky Tax Free |
| Us Government Plus |
Kentucky Tax-free and Us Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kentucky Tax-free and Us Government
The main advantage of trading using opposite Kentucky Tax-free and Us Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kentucky Tax-free position performs unexpectedly, Us Government 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 Us Government will offset losses from the drop in Us Government's long position.The idea behind Kentucky Tax Free Short To Medium and Us Government Plus 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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