Correlation Between Municipal Bond and Live Oak
Can any of the company-specific risk be diversified away by investing in both Municipal Bond and Live Oak 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 Live Oak 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 Live Oak Health, you can compare the effects of market volatilities on Municipal Bond and Live Oak 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 Live Oak. Check out your portfolio center. Please also check ongoing floating volatility patterns of Municipal Bond and Live Oak.
Diversification Opportunities for Municipal Bond and Live Oak
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Municipal and Live is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Municipal Bond Portfolio and Live Oak Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Live Oak Health 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 Live Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Live Oak Health has no effect on the direction of Municipal Bond i.e., Municipal Bond and Live Oak go up and down completely randomly.
Pair Corralation between Municipal Bond and Live Oak
Assuming the 90 days horizon Municipal Bond Portfolio is expected to generate 0.32 times more return on investment than Live Oak. However, Municipal Bond Portfolio is 3.1 times less risky than Live Oak. It trades about -0.02 of its potential returns per unit of risk. Live Oak Health is currently generating about -0.31 per unit of risk. If you would invest 889.00 in Municipal Bond Portfolio on September 12, 2024 and sell it today you would lose (1.00) from holding Municipal Bond Portfolio or give up 0.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Municipal Bond Portfolio vs. Live Oak Health
Performance |
| Timeline |
| Municipal Bond Portfolio |
| Live Oak Health |
Municipal Bond and Live Oak Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Municipal Bond and Live Oak
The main advantage of trading using opposite Municipal Bond and Live Oak positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Municipal Bond position performs unexpectedly, Live Oak 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 Live Oak will offset losses from the drop in Live Oak's long position.| Municipal Bond vs. Artisan High Income | Municipal Bond vs. Ab Global Risk | Municipal Bond vs. Fa 529 Aggressive | Municipal Bond vs. Ab Global Risk |
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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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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