Correlation Between Municipal Bond and Total Return
Can any of the company-specific risk be diversified away by investing in both Municipal Bond and Total Return 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 Total Return 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 Total Return Fund, you can compare the effects of market volatilities on Municipal Bond and Total Return 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 Total Return. Check out your portfolio center. Please also check ongoing floating volatility patterns of Municipal Bond and Total Return.
Diversification Opportunities for Municipal Bond and Total Return
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Municipal and Total is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Municipal Bond Fund and Total Return Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Return 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 Total Return. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Return has no effect on the direction of Municipal Bond i.e., Municipal Bond and Total Return go up and down completely randomly.
Pair Corralation between Municipal Bond and Total Return
Assuming the 90 days horizon Municipal Bond Fund is expected to generate 0.94 times more return on investment than Total Return. However, Municipal Bond Fund is 1.06 times less risky than Total Return. It trades about 0.14 of its potential returns per unit of risk. Total Return Fund is currently generating about 0.07 per unit of risk. If you would invest 943.00 in Municipal Bond Fund on August 29, 2024 and sell it today you would earn a total of 9.00 from holding Municipal Bond Fund or generate 0.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Municipal Bond Fund vs. Total Return Fund
Performance |
| Timeline |
| Municipal Bond |
| Total Return |
Municipal Bond and Total Return Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Municipal Bond and Total Return
The main advantage of trading using opposite Municipal Bond and Total Return positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Municipal Bond position performs unexpectedly, Total Return 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 Total Return will offset losses from the drop in Total Return's long position.| Municipal Bond vs. Pimco Rae Worldwide | Municipal Bond vs. Pimco Rae Worldwide | Municipal Bond vs. Pimco Rae Worldwide | Municipal Bond vs. Pimco Rae Worldwide |
| Total Return vs. T Rowe Price | Total Return vs. Mid Cap Growth | Total Return vs. Artisan Small Cap | Total Return vs. Growth Fund Of |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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