Correlation Between Morningstar Municipal and Multi Manager
Can any of the company-specific risk be diversified away by investing in both Morningstar Municipal and Multi Manager 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 Multi Manager 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 Multi Manager High Yield, you can compare the effects of market volatilities on Morningstar Municipal and Multi Manager 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 Multi Manager. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morningstar Municipal and Multi Manager.
Diversification Opportunities for Morningstar Municipal and Multi Manager
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Morningstar and Multi is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Morningstar Municipal Bond and Multi Manager High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Manager High 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 Multi Manager. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Manager High has no effect on the direction of Morningstar Municipal i.e., Morningstar Municipal and Multi Manager go up and down completely randomly.
Pair Corralation between Morningstar Municipal and Multi Manager
Assuming the 90 days horizon Morningstar Municipal is expected to generate 2.08 times less return on investment than Multi Manager. But when comparing it to its historical volatility, Morningstar Municipal Bond is 1.4 times less risky than Multi Manager. It trades about 0.09 of its potential returns per unit of risk. Multi Manager High Yield is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 719.00 in Multi Manager High Yield on September 3, 2024 and sell it today you would earn a total of 131.00 from holding Multi Manager High Yield or generate 18.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Morningstar Municipal Bond vs. Multi Manager High Yield
Performance |
| Timeline |
| Morningstar Municipal |
| Multi Manager High |
Morningstar Municipal and Multi Manager Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Morningstar Municipal and Multi Manager
The main advantage of trading using opposite Morningstar Municipal and Multi Manager positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morningstar Municipal position performs unexpectedly, Multi Manager 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 Multi Manager will offset losses from the drop in Multi Manager's long position.The idea behind Morningstar Municipal Bond and Multi Manager High Yield 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.
| Multi Manager vs. Intermediate Term Tax Free Bond | Multi Manager vs. Federated Pennsylvania Municipal | Multi Manager vs. Ishares Municipal Bond | Multi Manager vs. Morningstar Municipal 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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