Correlation Between Smallcap Growth and Municipal Bond
Can any of the company-specific risk be diversified away by investing in both Smallcap Growth and Municipal Bond 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 Smallcap Growth and Municipal Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smallcap Growth Fund and Municipal Bond Portfolio, you can compare the effects of market volatilities on Smallcap Growth and Municipal Bond 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 Smallcap Growth with a short position of Municipal Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap Growth and Municipal Bond.
Diversification Opportunities for Smallcap Growth and Municipal Bond
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Smallcap and Municipal is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Growth Fund and Municipal Bond Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Municipal Bond Portfolio and Smallcap Growth 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 Smallcap Growth Fund are associated (or correlated) with Municipal Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Municipal Bond Portfolio has no effect on the direction of Smallcap Growth i.e., Smallcap Growth and Municipal Bond go up and down completely randomly.
Pair Corralation between Smallcap Growth and Municipal Bond
Assuming the 90 days horizon Smallcap Growth Fund is expected to generate 6.05 times more return on investment than Municipal Bond. However, Smallcap Growth is 6.05 times more volatile than Municipal Bond Portfolio. It trades about 0.28 of its potential returns per unit of risk. Municipal Bond Portfolio is currently generating about 0.18 per unit of risk. If you would invest 1,593 in Smallcap Growth Fund on September 3, 2024 and sell it today you would earn a total of 136.00 from holding Smallcap Growth Fund or generate 8.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smallcap Growth Fund vs. Municipal Bond Portfolio
Performance |
| Timeline |
| Smallcap Growth |
| Municipal Bond Portfolio |
Smallcap Growth and Municipal Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smallcap Growth and Municipal Bond
The main advantage of trading using opposite Smallcap Growth and Municipal Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap Growth position performs unexpectedly, Municipal Bond 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 Municipal Bond will offset losses from the drop in Municipal Bond's long position.| Smallcap Growth vs. Goldman Sachs Real | Smallcap Growth vs. Vanguard Reit Index | Smallcap Growth vs. Deutsche Real Estate | Smallcap Growth vs. Amg Managers Centersquare |
| Municipal Bond vs. Pace Large Growth | Municipal Bond vs. L Abbett Growth | Municipal Bond vs. Smallcap Growth Fund | Municipal Bond vs. Mid Cap Growth |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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