Correlation Between North Carolina and Kentucky Tax-free
Can any of the company-specific risk be diversified away by investing in both North Carolina and Kentucky 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 North Carolina and Kentucky Tax-free into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North Carolina Tax Free and Kentucky Tax Free Income, you can compare the effects of market volatilities on North Carolina and Kentucky 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 North Carolina with a short position of Kentucky Tax-free. Check out your portfolio center. Please also check ongoing floating volatility patterns of North Carolina and Kentucky Tax-free.
Diversification Opportunities for North Carolina and Kentucky Tax-free
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between North and Kentucky is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding North Carolina Tax Free and Kentucky Tax Free Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kentucky Tax Free and North Carolina 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 North Carolina Tax Free are associated (or correlated) with Kentucky 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 Kentucky Tax Free has no effect on the direction of North Carolina i.e., North Carolina and Kentucky Tax-free go up and down completely randomly.
Pair Corralation between North Carolina and Kentucky Tax-free
Assuming the 90 days horizon North Carolina is expected to generate 2.43 times less return on investment than Kentucky Tax-free. But when comparing it to its historical volatility, North Carolina Tax Free is 3.83 times less risky than Kentucky Tax-free. It trades about 0.18 of its potential returns per unit of risk. Kentucky Tax Free Income is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 718.00 in Kentucky Tax Free Income on August 28, 2024 and sell it today you would earn a total of 5.00 from holding Kentucky Tax Free Income or generate 0.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
North Carolina Tax Free vs. Kentucky Tax Free Income
Performance |
| Timeline |
| North Carolina Tax |
| Kentucky Tax Free |
North Carolina and Kentucky Tax-free Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North Carolina and Kentucky Tax-free
The main advantage of trading using opposite North Carolina and Kentucky Tax-free positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North Carolina position performs unexpectedly, Kentucky 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 Kentucky Tax-free will offset losses from the drop in Kentucky Tax-free's long position.| North Carolina vs. North Carolina Tax Free | North Carolina vs. Kentucky Tax Free Short To Medium | North Carolina vs. Kentucky Tax Free Income | North Carolina vs. Intermediate Government Bond |
| Kentucky Tax-free vs. Great West Real Estate | Kentucky Tax-free vs. Neuberger Berman Real | Kentucky Tax-free vs. Columbia Real Estate | Kentucky Tax-free vs. Franklin Real Estate |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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