Correlation Between Maryland Tax and Georgia Tax-free
Can any of the company-specific risk be diversified away by investing in both Maryland Tax and Georgia Tax-free 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 Maryland Tax and Georgia Tax-free into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Maryland Tax Free Bond and Georgia Tax Free Bond, you can compare the effects of market volatilities on Maryland Tax and Georgia Tax-free 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 Maryland Tax with a short position of Georgia Tax-free. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maryland Tax and Georgia Tax-free.
Diversification Opportunities for Maryland Tax and Georgia Tax-free
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Maryland and Georgia is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Maryland Tax Free Bond and Georgia Tax Free Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Georgia Tax Free and Maryland Tax 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 Maryland Tax Free Bond are associated (or correlated) with Georgia Tax-free. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Georgia Tax Free has no effect on the direction of Maryland Tax i.e., Maryland Tax and Georgia Tax-free go up and down completely randomly.
Pair Corralation between Maryland Tax and Georgia Tax-free
Assuming the 90 days horizon Maryland Tax is expected to generate 1.05 times less return on investment than Georgia Tax-free. But when comparing it to its historical volatility, Maryland Tax Free Bond is 1.05 times less risky than Georgia Tax-free. It trades about 0.08 of its potential returns per unit of risk. Georgia Tax Free Bond is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,025 in Georgia Tax Free Bond on August 28, 2024 and sell it today you would earn a total of 77.00 from holding Georgia Tax Free Bond or generate 7.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Maryland Tax Free Bond vs. Georgia Tax Free Bond
Performance |
| Timeline |
| Maryland Tax Free |
| Georgia Tax Free |
Maryland Tax and Georgia Tax-free Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Maryland Tax and Georgia Tax-free
The main advantage of trading using opposite Maryland Tax and Georgia Tax-free positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maryland Tax position performs unexpectedly, Georgia Tax-free 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 Georgia Tax-free will offset losses from the drop in Georgia Tax-free's long position.| Maryland Tax vs. New Jersey Tax Free | Maryland Tax vs. New York Tax Free | Maryland Tax vs. Maryland Short Term Tax Free |
| Georgia Tax-free vs. New Jersey Tax Free | Georgia Tax-free vs. Maryland Tax Free Bond | Georgia Tax-free vs. New York Tax Free | Georgia Tax-free vs. Virginia Tax Free Bond |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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