Correlation Between Tax Exempt and First Trust
Can any of the company-specific risk be diversified away by investing in both Tax Exempt and First Trust 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 Tax Exempt and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tax Exempt Bond and First Trust Managed, you can compare the effects of market volatilities on Tax Exempt and First Trust 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 Tax Exempt with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tax Exempt and First Trust.
Diversification Opportunities for Tax Exempt and First Trust
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Tax and First is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Tax Exempt Bond and First Trust Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Managed and Tax Exempt 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 Tax Exempt Bond are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Managed has no effect on the direction of Tax Exempt i.e., Tax Exempt and First Trust go up and down completely randomly.
Pair Corralation between Tax Exempt and First Trust
Assuming the 90 days horizon Tax Exempt is expected to generate 1.22 times less return on investment than First Trust. In addition to that, Tax Exempt is 1.11 times more volatile than First Trust Managed. It trades about 0.08 of its total potential returns per unit of risk. First Trust Managed is currently generating about 0.1 per unit of volatility. If you would invest 1,916 in First Trust Managed on August 31, 2024 and sell it today you would earn a total of 148.00 from holding First Trust Managed or generate 7.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tax Exempt Bond vs. First Trust Managed
Performance |
| Timeline |
| Tax Exempt Bond |
| First Trust Managed |
Tax Exempt and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tax Exempt and First Trust
The main advantage of trading using opposite Tax Exempt and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tax Exempt position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Tax Exempt vs. Versatile Bond Portfolio | Tax Exempt vs. Nuveen Arizona Municipal | Tax Exempt vs. Ambrus Core Bond | Tax Exempt vs. Thrivent Income Fund |
| First Trust vs. Vanguard Intermediate Term Tax Exempt | First Trust vs. Tax Exempt Bond | First Trust vs. Blackrock National Municipal | First Trust vs. HUMANA INC |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
Other Complementary Tools
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments |