Correlation Between Aquila Tax-free and Kentucky Tax-free
Can any of the company-specific risk be diversified away by investing in both Aquila Tax-free 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 Aquila Tax-free 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 Aquila Tax Free Trust and Kentucky Tax Free Income, you can compare the effects of market volatilities on Aquila Tax-free 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 Aquila Tax-free with a short position of Kentucky Tax-free. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aquila Tax-free and Kentucky Tax-free.
Diversification Opportunities for Aquila Tax-free and Kentucky Tax-free
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Aquila and Kentucky is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Aquila Tax Free Trust 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 Aquila Tax-free 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 Aquila Tax Free Trust 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 Aquila Tax-free i.e., Aquila Tax-free and Kentucky Tax-free go up and down completely randomly.
Pair Corralation between Aquila Tax-free and Kentucky Tax-free
Assuming the 90 days horizon Aquila Tax-free is expected to generate 1.52 times less return on investment than Kentucky Tax-free. But when comparing it to its historical volatility, Aquila Tax Free Trust is 1.42 times less risky than Kentucky Tax-free. It trades about 0.05 of its potential returns per unit of risk. Kentucky Tax Free Income is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 680.00 in Kentucky Tax Free Income on August 25, 2024 and sell it today you would earn a total of 43.00 from holding Kentucky Tax Free Income or generate 6.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aquila Tax Free Trust vs. Kentucky Tax Free Income
Performance |
| Timeline |
| Aquila Tax Free |
| Kentucky Tax Free |
Aquila Tax-free and Kentucky Tax-free Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aquila Tax-free and Kentucky Tax-free
The main advantage of trading using opposite Aquila Tax-free and Kentucky Tax-free positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aquila Tax-free 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.| Aquila Tax-free vs. T Rowe Price | Aquila Tax-free vs. Falcon Focus Scv | Aquila Tax-free vs. Arrow Managed Futures | Aquila Tax-free vs. Rbb Fund |
| Kentucky Tax-free vs. Kinetics Global Fund | Kentucky Tax-free vs. Dodge Global Stock | Kentucky Tax-free vs. Morgan Stanley Global | Kentucky Tax-free vs. Vanguard Global Credit |
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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