Correlation Between Capital Income and High-yield Municipal
Can any of the company-specific risk be diversified away by investing in both Capital Income 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 Capital Income 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 Capital Income Builder and High Yield Municipal Fund, you can compare the effects of market volatilities on Capital Income 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 Capital Income with a short position of High-yield Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Income and High-yield Municipal.
Diversification Opportunities for Capital Income and High-yield Municipal
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Capital and High-yield is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Capital Income Builder 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 Capital Income 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 Capital Income Builder 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 Capital Income i.e., Capital Income and High-yield Municipal go up and down completely randomly.
Pair Corralation between Capital Income and High-yield Municipal
Assuming the 90 days horizon Capital Income Builder is expected to generate 1.76 times more return on investment than High-yield Municipal. However, Capital Income is 1.76 times more volatile than High Yield Municipal Fund. It trades about 0.08 of its potential returns per unit of risk. High Yield Municipal Fund is currently generating about 0.07 per unit of risk. If you would invest 6,036 in Capital Income Builder on August 29, 2024 and sell it today you would earn a total of 1,259 from holding Capital Income Builder or generate 20.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Income Builder vs. High Yield Municipal Fund
Performance |
| Timeline |
| Capital Income Builder |
| High Yield Municipal |
Capital Income and High-yield Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Income and High-yield Municipal
The main advantage of trading using opposite Capital Income and High-yield Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Income 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.| Capital Income vs. Transamerica Intermediate Muni | Capital Income vs. California High Yield Municipal | Capital Income vs. Counterpoint Tactical Municipal | Capital Income vs. Ab Impact Municipal |
| High-yield Municipal vs. High Yield Fund Investor | High-yield Municipal vs. Intermediate Term Tax Free Bond | High-yield Municipal vs. California High Yield Municipal | High-yield Municipal vs. T Rowe Price |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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