Correlation Between Morningstar Municipal and Short Oil
Can any of the company-specific risk be diversified away by investing in both Morningstar Municipal and Short Oil 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 Short Oil 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 Short Oil Gas, you can compare the effects of market volatilities on Morningstar Municipal and Short Oil 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 Short Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morningstar Municipal and Short Oil.
Diversification Opportunities for Morningstar Municipal and Short Oil
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Morningstar and Short is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Morningstar Municipal Bond and Short Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Oil Gas 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 Short Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Oil Gas has no effect on the direction of Morningstar Municipal i.e., Morningstar Municipal and Short Oil go up and down completely randomly.
Pair Corralation between Morningstar Municipal and Short Oil
Assuming the 90 days horizon Morningstar Municipal Bond is expected to generate 0.15 times more return on investment than Short Oil. However, Morningstar Municipal Bond is 6.65 times less risky than Short Oil. It trades about -0.35 of its potential returns per unit of risk. Short Oil Gas is currently generating about -0.28 per unit of risk. If you would invest 1,002 in Morningstar Municipal Bond on October 17, 2024 and sell it today you would lose (15.00) from holding Morningstar Municipal Bond or give up 1.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Morningstar Municipal Bond vs. Short Oil Gas
Performance |
| Timeline |
| Morningstar Municipal |
| Short Oil Gas |
Morningstar Municipal and Short Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Morningstar Municipal and Short Oil
The main advantage of trading using opposite Morningstar Municipal and Short Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morningstar Municipal position performs unexpectedly, Short Oil 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 Short Oil will offset losses from the drop in Short Oil's long position.The idea behind Morningstar Municipal Bond and Short Oil Gas 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.
| Short Oil vs. Blackrock Pa Muni | Short Oil vs. Morningstar Municipal Bond | Short Oil vs. Inverse Government Long | Short Oil vs. Virtus Seix Government |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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