Correlation Between Tax-exempt Bond and Gabelli Equity
Can any of the company-specific risk be diversified away by investing in both Tax-exempt Bond and Gabelli Equity 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 Tax-exempt Bond and Gabelli Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tax Exempt Bond Fund and The Gabelli Equity, you can compare the effects of market volatilities on Tax-exempt Bond and Gabelli Equity 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 Tax-exempt Bond with a short position of Gabelli Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tax-exempt Bond and Gabelli Equity.
Diversification Opportunities for Tax-exempt Bond and Gabelli Equity
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Tax-exempt and Gabelli is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Tax Exempt Bond Fund and The Gabelli Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Equity and Tax-exempt 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 Tax Exempt Bond Fund are associated (or correlated) with Gabelli Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Equity has no effect on the direction of Tax-exempt Bond i.e., Tax-exempt Bond and Gabelli Equity go up and down completely randomly.
Pair Corralation between Tax-exempt Bond and Gabelli Equity
Assuming the 90 days horizon Tax-exempt Bond is expected to generate 8.44 times less return on investment than Gabelli Equity. But when comparing it to its historical volatility, Tax Exempt Bond Fund is 3.18 times less risky than Gabelli Equity. It trades about 0.13 of its potential returns per unit of risk. The Gabelli Equity is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 610.00 in The Gabelli Equity on September 3, 2024 and sell it today you would earn a total of 39.00 from holding The Gabelli Equity or generate 6.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tax Exempt Bond Fund vs. The Gabelli Equity
Performance |
| Timeline |
| Tax Exempt Bond |
| Gabelli Equity |
Tax-exempt Bond and Gabelli Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tax-exempt Bond and Gabelli Equity
The main advantage of trading using opposite Tax-exempt Bond and Gabelli Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tax-exempt Bond position performs unexpectedly, Gabelli Equity 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 Gabelli Equity will offset losses from the drop in Gabelli Equity's long position.| Tax-exempt Bond vs. Jhancock Disciplined Value | Tax-exempt Bond vs. Americafirst Large Cap | Tax-exempt Bond vs. Siit Large Cap | Tax-exempt Bond vs. Avantis Large Cap |
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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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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