Correlation Between Oklahoma Municipal and The Fairholme
Can any of the company-specific risk be diversified away by investing in both Oklahoma Municipal and The Fairholme 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 Oklahoma Municipal and The Fairholme into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oklahoma Municipal Fund and The Fairholme Focused, you can compare the effects of market volatilities on Oklahoma Municipal and The Fairholme 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 Oklahoma Municipal with a short position of The Fairholme. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oklahoma Municipal and The Fairholme.
Diversification Opportunities for Oklahoma Municipal and The Fairholme
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Oklahoma and The is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Oklahoma Municipal Fund and The Fairholme Focused in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairholme Focused and Oklahoma 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 Oklahoma Municipal Fund are associated (or correlated) with The Fairholme. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairholme Focused has no effect on the direction of Oklahoma Municipal i.e., Oklahoma Municipal and The Fairholme go up and down completely randomly.
Pair Corralation between Oklahoma Municipal and The Fairholme
Assuming the 90 days horizon Oklahoma Municipal Fund is expected to under-perform the The Fairholme. But the mutual fund apears to be less risky and, when comparing its historical volatility, Oklahoma Municipal Fund is 1.54 times less risky than The Fairholme. The mutual fund trades about -0.38 of its potential returns per unit of risk. The The Fairholme Focused is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 1,400 in The Fairholme Focused on October 10, 2024 and sell it today you would lose (11.00) from holding The Fairholme Focused or give up 0.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oklahoma Municipal Fund vs. The Fairholme Focused
Performance |
| Timeline |
| Oklahoma Municipal |
| Fairholme Focused |
Oklahoma Municipal and The Fairholme Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oklahoma Municipal and The Fairholme
The main advantage of trading using opposite Oklahoma Municipal and The Fairholme positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oklahoma Municipal position performs unexpectedly, The Fairholme 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 The Fairholme will offset losses from the drop in The Fairholme's long position.| Oklahoma Municipal vs. Aqr Long Short Equity | Oklahoma Municipal vs. Dreyfusstandish Global Fixed | Oklahoma Municipal vs. Ab Select Equity | Oklahoma Municipal vs. Gmo Global Equity |
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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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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