Correlation Between Municipal Bond and Real Estate
Can any of the company-specific risk be diversified away by investing in both Municipal Bond and Real Estate 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 Real Estate 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 Real Estate Fund, you can compare the effects of market volatilities on Municipal Bond and Real Estate 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 Real Estate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Municipal Bond and Real Estate.
Diversification Opportunities for Municipal Bond and Real Estate
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Municipal and Real is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Municipal Bond Portfolio and Real Estate Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Estate 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 Real Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Estate Fund has no effect on the direction of Municipal Bond i.e., Municipal Bond and Real Estate go up and down completely randomly.
Pair Corralation between Municipal Bond and Real Estate
Assuming the 90 days horizon Municipal Bond is expected to generate 3.95 times less return on investment than Real Estate. But when comparing it to its historical volatility, Municipal Bond Portfolio is 5.03 times less risky than Real Estate. It trades about 0.1 of its potential returns per unit of risk. Real Estate Fund is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,773 in Real Estate Fund on August 29, 2024 and sell it today you would earn a total of 49.00 from holding Real Estate Fund or generate 1.77% 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. Real Estate Fund
Performance |
| Timeline |
| Municipal Bond Portfolio |
| Real Estate Fund |
Municipal Bond and Real Estate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Municipal Bond and Real Estate
The main advantage of trading using opposite Municipal Bond and Real Estate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Municipal Bond position performs unexpectedly, Real Estate 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 Real Estate will offset losses from the drop in Real Estate's long position.| Municipal Bond vs. Fidelity Advisor Real | Municipal Bond vs. Commonwealth Real Estate | Municipal Bond vs. Forum Real Estate | Municipal Bond vs. Franklin Real Estate |
| Real Estate vs. Baird Smallmid Cap | Real Estate vs. Tax Managed Mid Small | Real Estate vs. Ab Small Cap | Real Estate vs. Qs Small Capitalization |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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