Correlation Between Kentucky Tax-free and Kansas Municipal
Can any of the company-specific risk be diversified away by investing in both Kentucky Tax-free and Kansas 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 Kentucky Tax-free and Kansas Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kentucky Tax Free Income and Kansas Municipal Fund, you can compare the effects of market volatilities on Kentucky Tax-free and Kansas 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 Kentucky Tax-free with a short position of Kansas Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kentucky Tax-free and Kansas Municipal.
Diversification Opportunities for Kentucky Tax-free and Kansas Municipal
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Kentucky and Kansas is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Kentucky Tax Free Income and Kansas Municipal Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kansas Municipal 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 Income are associated (or correlated) with Kansas Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kansas Municipal has no effect on the direction of Kentucky Tax-free i.e., Kentucky Tax-free and Kansas Municipal go up and down completely randomly.
Pair Corralation between Kentucky Tax-free and Kansas Municipal
Assuming the 90 days horizon Kentucky Tax-free is expected to generate 1.23 times less return on investment than Kansas Municipal. But when comparing it to its historical volatility, Kentucky Tax Free Income is 1.13 times less risky than Kansas Municipal. It trades about 0.15 of its potential returns per unit of risk. Kansas Municipal Fund is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 958.00 in Kansas Municipal Fund on August 29, 2024 and sell it today you would earn a total of 12.00 from holding Kansas Municipal Fund or generate 1.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Kentucky Tax Free Income vs. Kansas Municipal Fund
Performance |
| Timeline |
| Kentucky Tax Free |
| Kansas Municipal |
Kentucky Tax-free and Kansas Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kentucky Tax-free and Kansas Municipal
The main advantage of trading using opposite Kentucky Tax-free and Kansas Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kentucky Tax-free position performs unexpectedly, Kansas 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 Kansas Municipal will offset losses from the drop in Kansas Municipal's long position.| Kentucky Tax-free vs. Icon Natural Resources | Kentucky Tax-free vs. Oil Gas Ultrasector | Kentucky Tax-free vs. Fidelity Advisor Energy | Kentucky Tax-free vs. Gmo Resources |
| Kansas Municipal vs. Artisan Emerging Markets | Kansas Municipal vs. California Bond Fund | Kansas Municipal vs. Blrc Sgy Mnp | Kansas Municipal vs. Kinetics Market Opportunities |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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