Correlation Between Oklahoma Municipal and Extended Market
Can any of the company-specific risk be diversified away by investing in both Oklahoma Municipal and Extended Market 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 Extended Market 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 Extended Market Index, you can compare the effects of market volatilities on Oklahoma Municipal and Extended Market 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 Extended Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oklahoma Municipal and Extended Market.
Diversification Opportunities for Oklahoma Municipal and Extended Market
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Oklahoma and Extended is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Oklahoma Municipal Fund and Extended Market Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extended Market Index 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 Extended Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extended Market Index has no effect on the direction of Oklahoma Municipal i.e., Oklahoma Municipal and Extended Market go up and down completely randomly.
Pair Corralation between Oklahoma Municipal and Extended Market
Assuming the 90 days horizon Oklahoma Municipal Fund is expected to generate 0.11 times more return on investment than Extended Market. However, Oklahoma Municipal Fund is 8.86 times less risky than Extended Market. It trades about -0.38 of its potential returns per unit of risk. Extended Market Index is currently generating about -0.3 per unit of risk. If you would invest 1,068 in Oklahoma Municipal Fund on October 10, 2024 and sell it today you would lose (25.00) from holding Oklahoma Municipal Fund or give up 2.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oklahoma Municipal Fund vs. Extended Market Index
Performance |
| Timeline |
| Oklahoma Municipal |
| Extended Market Index |
Oklahoma Municipal and Extended Market Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oklahoma Municipal and Extended Market
The main advantage of trading using opposite Oklahoma Municipal and Extended Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oklahoma Municipal position performs unexpectedly, Extended Market 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 Extended Market will offset losses from the drop in Extended Market'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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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