Correlation Between Municipal Bond and Global Gold
Can any of the company-specific risk be diversified away by investing in both Municipal Bond and Global Gold 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 Municipal Bond and Global Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Municipal Bond Portfolio and Global Gold Fund, you can compare the effects of market volatilities on Municipal Bond and Global Gold 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 Municipal Bond with a short position of Global Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Municipal Bond and Global Gold.
Diversification Opportunities for Municipal Bond and Global Gold
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Municipal and Global is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Municipal Bond Portfolio and Global Gold Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Gold Fund and Municipal 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 Municipal Bond Portfolio are associated (or correlated) with Global Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Gold Fund has no effect on the direction of Municipal Bond i.e., Municipal Bond and Global Gold go up and down completely randomly.
Pair Corralation between Municipal Bond and Global Gold
Assuming the 90 days horizon Municipal Bond Portfolio is expected to under-perform the Global Gold. But the mutual fund apears to be less risky and, when comparing its historical volatility, Municipal Bond Portfolio is 10.38 times less risky than Global Gold. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Global Gold Fund is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,178 in Global Gold Fund on November 3, 2024 and sell it today you would earn a total of 171.00 from holding Global Gold Fund or generate 14.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Municipal Bond Portfolio vs. Global Gold Fund
Performance |
| Timeline |
| Municipal Bond Portfolio |
| Global Gold Fund |
Municipal Bond and Global Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Municipal Bond and Global Gold
The main advantage of trading using opposite Municipal Bond and Global Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Municipal Bond position performs unexpectedly, Global Gold 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 Global Gold will offset losses from the drop in Global Gold's long position.| Municipal Bond vs. Invesco Gold Special | Municipal Bond vs. James Balanced Golden | Municipal Bond vs. Global Gold Fund | Municipal Bond vs. Deutsche Gold Precious |
| Global Gold vs. Vanguard Small Cap Value | Global Gold vs. Omni Small Cap Value | Global Gold vs. Heartland Value Plus | Global Gold vs. Fpa Queens Road |
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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