Correlation Between Municipal Bond and Aggressive Balanced
Can any of the company-specific risk be diversified away by investing in both Municipal Bond and Aggressive Balanced 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 Aggressive Balanced 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 Aggressive Balanced Allocation, you can compare the effects of market volatilities on Municipal Bond and Aggressive Balanced 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 Aggressive Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Municipal Bond and Aggressive Balanced.
Diversification Opportunities for Municipal Bond and Aggressive Balanced
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Municipal and Aggressive is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Municipal Bond Portfolio and Aggressive Balanced Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Balanced 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 Aggressive Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Balanced has no effect on the direction of Municipal Bond i.e., Municipal Bond and Aggressive Balanced go up and down completely randomly.
Pair Corralation between Municipal Bond and Aggressive Balanced
Assuming the 90 days horizon Municipal Bond is expected to generate 8.88 times less return on investment than Aggressive Balanced. But when comparing it to its historical volatility, Municipal Bond Portfolio is 4.24 times less risky than Aggressive Balanced. It trades about 0.05 of its potential returns per unit of risk. Aggressive Balanced Allocation is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 984.00 in Aggressive Balanced Allocation on September 1, 2024 and sell it today you would earn a total of 273.00 from holding Aggressive Balanced Allocation or generate 27.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Municipal Bond Portfolio vs. Aggressive Balanced Allocation
Performance |
| Timeline |
| Municipal Bond Portfolio |
| Aggressive Balanced |
Municipal Bond and Aggressive Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Municipal Bond and Aggressive Balanced
The main advantage of trading using opposite Municipal Bond and Aggressive Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Municipal Bond position performs unexpectedly, Aggressive Balanced 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 Aggressive Balanced will offset losses from the drop in Aggressive Balanced's long position.| Municipal Bond vs. Baron Health Care | Municipal Bond vs. Allianzgi Health Sciences | Municipal Bond vs. Health Biotchnology Portfolio | Municipal Bond vs. The Gabelli Healthcare |
| Aggressive Balanced vs. Salient Alternative Beta | Aggressive Balanced vs. Salient Alternative Beta | Aggressive Balanced vs. Moderately Aggressive Balanced | Aggressive Balanced vs. Salient Mlp Fund |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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