Correlation Between Tax-exempt Bond and Tax-exempt High
Can any of the company-specific risk be diversified away by investing in both Tax-exempt Bond 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 Tax-exempt Bond 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 Tax Exempt Bond Fund and Tax Exempt High Yield, you can compare the effects of market volatilities on Tax-exempt Bond 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 Tax-exempt Bond with a short position of Tax-exempt High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tax-exempt Bond and Tax-exempt High.
Diversification Opportunities for Tax-exempt Bond and Tax-exempt High
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between TAX-EXEMPT and Tax-exempt is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Tax Exempt Bond Fund 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 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 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 Tax-exempt Bond i.e., Tax-exempt Bond and Tax-exempt High go up and down completely randomly.
Pair Corralation between Tax-exempt Bond and Tax-exempt High
Assuming the 90 days horizon Tax-exempt Bond is expected to generate 1.54 times less return on investment than Tax-exempt High. But when comparing it to its historical volatility, Tax Exempt Bond Fund is 1.67 times less risky than Tax-exempt High. It trades about 0.13 of its potential returns per unit of risk. Tax Exempt High Yield is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 992.00 in Tax Exempt High Yield on August 25, 2024 and sell it today you would earn a total of 9.00 from holding Tax Exempt High Yield or generate 0.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tax Exempt Bond Fund vs. Tax Exempt High Yield
Performance |
| Timeline |
| Tax Exempt Bond |
| Tax Exempt High |
Tax-exempt Bond and Tax-exempt High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tax-exempt Bond and Tax-exempt High
The main advantage of trading using opposite Tax-exempt Bond and Tax-exempt High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tax-exempt Bond 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.| Tax-exempt Bond vs. Enhanced Large Pany | Tax-exempt Bond vs. Tax Managed Large Cap | Tax-exempt Bond vs. Nuveen Winslow Large Cap | Tax-exempt Bond vs. Aqr Large Cap |
| Tax-exempt High vs. Tax Exempt Fund Of | Tax-exempt High vs. Tax Exempt Fund Of | Tax-exempt High vs. Tax Exempt Bond Fund | Tax-exempt High vs. Tax Exempt Fund Of |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
Other Complementary Tools
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites |