Correlation Between Morningstar Defensive and Old Westbury
Can any of the company-specific risk be diversified away by investing in both Morningstar Defensive and Old Westbury 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 Morningstar Defensive and Old Westbury into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Morningstar Defensive Bond and Old Westbury Municipal, you can compare the effects of market volatilities on Morningstar Defensive and Old Westbury 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 Morningstar Defensive with a short position of Old Westbury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morningstar Defensive and Old Westbury.
Diversification Opportunities for Morningstar Defensive and Old Westbury
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Morningstar and Old is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Morningstar Defensive Bond and Old Westbury Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Westbury Municipal and Morningstar Defensive 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 Morningstar Defensive Bond are associated (or correlated) with Old Westbury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Westbury Municipal has no effect on the direction of Morningstar Defensive i.e., Morningstar Defensive and Old Westbury go up and down completely randomly.
Pair Corralation between Morningstar Defensive and Old Westbury
Assuming the 90 days horizon Morningstar Defensive is expected to generate 1.69 times less return on investment than Old Westbury. But when comparing it to its historical volatility, Morningstar Defensive Bond is 1.5 times less risky than Old Westbury. It trades about 0.17 of its potential returns per unit of risk. Old Westbury Municipal is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,146 in Old Westbury Municipal on August 31, 2024 and sell it today you would earn a total of 10.00 from holding Old Westbury Municipal or generate 0.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Morningstar Defensive Bond vs. Old Westbury Municipal
Performance |
| Timeline |
| Morningstar Defensive |
| Old Westbury Municipal |
Morningstar Defensive and Old Westbury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Morningstar Defensive and Old Westbury
The main advantage of trading using opposite Morningstar Defensive and Old Westbury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morningstar Defensive position performs unexpectedly, Old Westbury 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 Old Westbury will offset losses from the drop in Old Westbury's long position.| Morningstar Defensive vs. John Hancock Money | Morningstar Defensive vs. Ashmore Emerging Markets | Morningstar Defensive vs. Pimco Funds | Morningstar Defensive vs. American Century Investment |
| Old Westbury vs. Vanguard Intermediate Term Tax Exempt | Old Westbury vs. Vanguard Intermediate Term Tax Exempt | Old Westbury vs. Tax Exempt Bond | Old Westbury vs. Tax Exempt 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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