Correlation Between Municipal Bond and Gnma Fund
Can any of the company-specific risk be diversified away by investing in both Municipal Bond and Gnma Fund 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 Municipal Bond and Gnma Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Municipal Bond Fund and Gnma Fund Institutional, you can compare the effects of market volatilities on Municipal Bond and Gnma Fund 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 Municipal Bond with a short position of Gnma Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Municipal Bond and Gnma Fund.
Diversification Opportunities for Municipal Bond and Gnma Fund
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Municipal and Gnma is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Municipal Bond Fund and Gnma Fund Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gnma Fund Institutional and Municipal Bond 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 Municipal Bond Fund are associated (or correlated) with Gnma Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gnma Fund Institutional has no effect on the direction of Municipal Bond i.e., Municipal Bond and Gnma Fund go up and down completely randomly.
Pair Corralation between Municipal Bond and Gnma Fund
Assuming the 90 days horizon Municipal Bond Fund is expected to generate 0.96 times more return on investment than Gnma Fund. However, Municipal Bond Fund is 1.04 times less risky than Gnma Fund. It trades about 0.19 of its potential returns per unit of risk. Gnma Fund Institutional is currently generating about 0.14 per unit of risk. If you would invest 945.00 in Municipal Bond Fund on September 1, 2024 and sell it today you would earn a total of 12.00 from holding Municipal Bond Fund or generate 1.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Municipal Bond Fund vs. Gnma Fund Institutional
Performance |
| Timeline |
| Municipal Bond |
| Gnma Fund Institutional |
Municipal Bond and Gnma Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Municipal Bond and Gnma Fund
The main advantage of trading using opposite Municipal Bond and Gnma Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Municipal Bond position performs unexpectedly, Gnma Fund 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 Gnma Fund will offset losses from the drop in Gnma Fund's long position.| Municipal Bond vs. Old Westbury Short Term | Municipal Bond vs. Quantitative Longshort Equity | Municipal Bond vs. Aqr Sustainable Long Short | Municipal Bond vs. Astor Longshort Fund |
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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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