Correlation Between Strategic Bond and Tax-exempt Bond
Can any of the company-specific risk be diversified away by investing in both Strategic Bond and Tax-exempt Bond 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 Strategic Bond and Tax-exempt Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Strategic Bond Fund and Tax Exempt Bond Fund, you can compare the effects of market volatilities on Strategic Bond and Tax-exempt Bond 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 Strategic Bond with a short position of Tax-exempt Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Bond and Tax-exempt Bond.
Diversification Opportunities for Strategic Bond and Tax-exempt Bond
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Strategic and Tax-exempt is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Bond Fund and Tax Exempt Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Exempt Bond and Strategic 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 Strategic Bond Fund are associated (or correlated) with Tax-exempt Bond. 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 Bond has no effect on the direction of Strategic Bond i.e., Strategic Bond and Tax-exempt Bond go up and down completely randomly.
Pair Corralation between Strategic Bond and Tax-exempt Bond
Assuming the 90 days horizon Strategic Bond Fund is expected to under-perform the Tax-exempt Bond. In addition to that, Strategic Bond is 1.33 times more volatile than Tax Exempt Bond Fund. It trades about -0.12 of its total potential returns per unit of risk. Tax Exempt Bond Fund is currently generating about 0.11 per unit of volatility. If you would invest 2,185 in Tax Exempt Bond Fund on August 25, 2024 and sell it today you would earn a total of 11.00 from holding Tax Exempt Bond Fund or generate 0.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Strategic Bond Fund vs. Tax Exempt Bond Fund
Performance |
| Timeline |
| Strategic Bond |
| Tax Exempt Bond |
Strategic Bond and Tax-exempt Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Strategic Bond and Tax-exempt Bond
The main advantage of trading using opposite Strategic Bond and Tax-exempt Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Bond position performs unexpectedly, Tax-exempt Bond 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 Bond will offset losses from the drop in Tax-exempt Bond's long position.| Strategic Bond vs. Aqr Long Short Equity | Strategic Bond vs. Maryland Short Term Tax Free | Strategic Bond vs. Angel Oak Ultrashort | Strategic Bond vs. Guggenheim Long Short |
| Tax-exempt Bond vs. Vanguard Intermediate Term Tax Exempt | Tax-exempt Bond vs. Vanguard Intermediate Term Tax Exempt | Tax-exempt Bond vs. Tax Exempt Bond | Tax-exempt Bond 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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