Correlation Between Georgia Tax-free and American Funds
Can any of the company-specific risk be diversified away by investing in both Georgia Tax-free and American Funds 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 Georgia Tax-free and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Georgia Tax Free Bond and American Funds 2065, you can compare the effects of market volatilities on Georgia Tax-free and American Funds 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 Georgia Tax-free with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Georgia Tax-free and American Funds.
Diversification Opportunities for Georgia Tax-free and American Funds
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Georgia and American is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Georgia Tax Free Bond and American Funds 2065 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2065 and Georgia Tax-free 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 Georgia Tax Free Bond are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds 2065 has no effect on the direction of Georgia Tax-free i.e., Georgia Tax-free and American Funds go up and down completely randomly.
Pair Corralation between Georgia Tax-free and American Funds
Assuming the 90 days horizon Georgia Tax Free Bond is expected to generate 0.28 times more return on investment than American Funds. However, Georgia Tax Free Bond is 3.59 times less risky than American Funds. It trades about -0.34 of its potential returns per unit of risk. American Funds 2065 is currently generating about -0.23 per unit of risk. If you would invest 1,110 in Georgia Tax Free Bond on October 9, 2024 and sell it today you would lose (20.00) from holding Georgia Tax Free Bond or give up 1.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Georgia Tax Free Bond vs. American Funds 2065
Performance |
| Timeline |
| Georgia Tax Free |
| American Funds 2065 |
Georgia Tax-free and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Georgia Tax-free and American Funds
The main advantage of trading using opposite Georgia Tax-free and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Georgia Tax-free position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Georgia Tax-free vs. Siit High Yield | Georgia Tax-free vs. Lgm Risk Managed | Georgia Tax-free vs. Ab High Income | Georgia Tax-free vs. Inverse High Yield |
| American Funds vs. Harding Loevner Global | American Funds vs. Ab Global Bond | American Funds vs. Ms Global Fixed | American Funds vs. Wisdomtree Siegel Global |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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