Correlation Between Multi-asset Growth and Tax-exempt High

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Can any of the company-specific risk be diversified away by investing in both Multi-asset Growth and Tax-exempt High 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 Multi-asset Growth and Tax-exempt High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Multi Asset Growth Strategy and Tax Exempt High Yield, you can compare the effects of market volatilities on Multi-asset Growth and Tax-exempt High 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 Multi-asset Growth with a short position of Tax-exempt High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multi-asset Growth and Tax-exempt High.

Diversification Opportunities for Multi-asset Growth and Tax-exempt High

Multi-assetTax-exemptDiversified AwayMulti-assetTax-exemptDiversified Away100%
0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Multi-asset and Tax-exempt is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Multi Asset Growth Strategy and Tax Exempt High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Exempt High and Multi-asset 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 Multi Asset Growth Strategy are associated (or correlated) with Tax-exempt High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Exempt High has no effect on the direction of Multi-asset Growth i.e., Multi-asset Growth and Tax-exempt High go up and down completely randomly.

Pair Corralation between Multi-asset Growth and Tax-exempt High

Assuming the 90 days horizon Multi-asset Growth is expected to generate 4.08 times less return on investment than Tax-exempt High. In addition to that, Multi-asset Growth is 1.68 times more volatile than Tax Exempt High Yield. It trades about 0.03 of its total potential returns per unit of risk. Tax Exempt High Yield is currently generating about 0.22 per unit of volatility. If you would invest  987.00  in Tax Exempt High Yield on November 30, 2024 and sell it today you would earn a total of  12.00  from holding Tax Exempt High Yield or generate 1.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Multi Asset Growth Strategy  vs.  Tax Exempt High Yield

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -2-1012
JavaScript chart by amCharts 3.21.15RAZAX RHYTX
       Timeline  
Multi Asset Growth 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Multi Asset Growth Strategy has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Multi-asset Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb10.510.610.710.810.9
Tax Exempt High 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Tax Exempt High Yield has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Tax-exempt High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb9.79.759.89.859.99.9510

Multi-asset Growth and Tax-exempt High Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.46-1.07-0.68-0.290.010.330.721.111.5 1234
JavaScript chart by amCharts 3.21.15RAZAX RHYTX
       Returns  

Pair Trading with Multi-asset Growth and Tax-exempt High

The main advantage of trading using opposite Multi-asset Growth and Tax-exempt High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multi-asset Growth position performs unexpectedly, Tax-exempt High 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 Tax-exempt High will offset losses from the drop in Tax-exempt High's long position.
The idea behind Multi Asset Growth Strategy and Tax Exempt High Yield pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.

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