Correlation Between Preferred Securities and High-yield Municipal
Can any of the company-specific risk be diversified away by investing in both Preferred Securities and High-yield Municipal 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 Preferred Securities and High-yield Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Preferred Securities Fund and High Yield Municipal Fund, you can compare the effects of market volatilities on Preferred Securities and High-yield Municipal 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 Preferred Securities with a short position of High-yield Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Preferred Securities and High-yield Municipal.
Diversification Opportunities for Preferred Securities and High-yield Municipal
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Preferred and High-yield is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Preferred Securities Fund and High Yield Municipal Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Yield Municipal and Preferred Securities 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 Preferred Securities Fund are associated (or correlated) with High-yield Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Yield Municipal has no effect on the direction of Preferred Securities i.e., Preferred Securities and High-yield Municipal go up and down completely randomly.
Pair Corralation between Preferred Securities and High-yield Municipal
Assuming the 90 days horizon Preferred Securities Fund is expected to generate 0.51 times more return on investment than High-yield Municipal. However, Preferred Securities Fund is 1.95 times less risky than High-yield Municipal. It trades about 0.27 of its potential returns per unit of risk. High Yield Municipal Fund is currently generating about 0.14 per unit of risk. If you would invest 886.00 in Preferred Securities Fund on September 3, 2024 and sell it today you would earn a total of 48.00 from holding Preferred Securities Fund or generate 5.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Preferred Securities Fund vs. High Yield Municipal Fund
Performance |
| Timeline |
| Preferred Securities |
| High Yield Municipal |
Preferred Securities and High-yield Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Preferred Securities and High-yield Municipal
The main advantage of trading using opposite Preferred Securities and High-yield Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Preferred Securities position performs unexpectedly, High-yield Municipal 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 High-yield Municipal will offset losses from the drop in High-yield Municipal's long position.| Preferred Securities vs. Ancorathelen Small Mid Cap | Preferred Securities vs. Us Small Cap | Preferred Securities vs. Ab Small Cap | Preferred Securities vs. Oklahoma College Savings |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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