Correlation Between Morningstar Municipal and Managed Account
Can any of the company-specific risk be diversified away by investing in both Morningstar Municipal and Managed Account 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 Municipal and Managed Account into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Morningstar Municipal Bond and Managed Account Series, you can compare the effects of market volatilities on Morningstar Municipal and Managed Account 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 Municipal with a short position of Managed Account. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morningstar Municipal and Managed Account.
Diversification Opportunities for Morningstar Municipal and Managed Account
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Morningstar and Managed is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Morningstar Municipal Bond and Managed Account Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Managed Account Series and Morningstar Municipal 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 Municipal Bond are associated (or correlated) with Managed Account. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Managed Account Series has no effect on the direction of Morningstar Municipal i.e., Morningstar Municipal and Managed Account go up and down completely randomly.
Pair Corralation between Morningstar Municipal and Managed Account
Assuming the 90 days horizon Morningstar Municipal is expected to generate 2.19 times less return on investment than Managed Account. In addition to that, Morningstar Municipal is 1.03 times more volatile than Managed Account Series. It trades about 0.02 of its total potential returns per unit of risk. Managed Account Series is currently generating about 0.06 per unit of volatility. If you would invest 888.00 in Managed Account Series on November 4, 2024 and sell it today you would earn a total of 2.00 from holding Managed Account Series or generate 0.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Morningstar Municipal Bond vs. Managed Account Series
Performance |
| Timeline |
| Morningstar Municipal |
| Managed Account Series |
Morningstar Municipal and Managed Account Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Morningstar Municipal and Managed Account
The main advantage of trading using opposite Morningstar Municipal and Managed Account positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morningstar Municipal position performs unexpectedly, Managed Account 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 Managed Account will offset losses from the drop in Managed Account's long position.The idea behind Morningstar Municipal Bond and Managed Account Series 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.
| Managed Account vs. Blackrock California Municipal | Managed Account vs. Blackrock Balanced Capital | Managed Account vs. Blackrock Eurofund Class | Managed Account vs. Blackrock Funds |
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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