Correlation Between New Economy and Tax Exempt
Can any of the company-specific risk be diversified away by investing in both New Economy and Tax Exempt 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 New Economy and Tax Exempt into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Economy Fund and Tax Exempt Fund Of, you can compare the effects of market volatilities on New Economy and Tax Exempt 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 New Economy with a short position of Tax Exempt. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Economy and Tax Exempt.
Diversification Opportunities for New Economy and Tax Exempt
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between New and Tax is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding New Economy Fund and Tax Exempt Fund Of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Exempt Fund and New Economy 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 New Economy Fund are associated (or correlated) with Tax Exempt. 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 Fund has no effect on the direction of New Economy i.e., New Economy and Tax Exempt go up and down completely randomly.
Pair Corralation between New Economy and Tax Exempt
Assuming the 90 days horizon New Economy Fund is expected to generate 3.39 times more return on investment than Tax Exempt. However, New Economy is 3.39 times more volatile than Tax Exempt Fund Of. It trades about 0.08 of its potential returns per unit of risk. Tax Exempt Fund Of is currently generating about 0.2 per unit of risk. If you would invest 6,739 in New Economy Fund on August 30, 2024 and sell it today you would earn a total of 103.00 from holding New Economy Fund or generate 1.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
New Economy Fund vs. Tax Exempt Fund Of
Performance |
| Timeline |
| New Economy Fund |
| Tax Exempt Fund |
New Economy and Tax Exempt Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Economy and Tax Exempt
The main advantage of trading using opposite New Economy and Tax Exempt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Economy position performs unexpectedly, Tax Exempt 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 will offset losses from the drop in Tax Exempt's long position.| New Economy vs. Us Real Estate | New Economy vs. Versus Capital Multi Manager | New Economy vs. Msif Real Estate | New Economy vs. Morgan Stanley Institutional |
| Tax Exempt vs. American High Income Municipal | Tax Exempt vs. California Intermediate Term Tax Free | Tax Exempt vs. Capital World Bond | Tax Exempt vs. Tax Exempt Bond |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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