Correlation Between Tax Exempt and American Funds
Can any of the company-specific risk be diversified away by investing in both Tax Exempt 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 Tax Exempt and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tax Exempt Fund Of and American Funds Fundamental, you can compare the effects of market volatilities on Tax Exempt 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 Tax Exempt with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tax Exempt and American Funds.
Diversification Opportunities for Tax Exempt and American Funds
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Tax and American is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Tax Exempt Fund Of and American Funds Fundamental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Funda 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 Fund Of 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 Funda has no effect on the direction of Tax Exempt i.e., Tax Exempt and American Funds go up and down completely randomly.
Pair Corralation between Tax Exempt and American Funds
Assuming the 90 days horizon Tax Exempt is expected to generate 3.83 times less return on investment than American Funds. But when comparing it to its historical volatility, Tax Exempt Fund Of is 2.78 times less risky than American Funds. It trades about 0.08 of its potential returns per unit of risk. American Funds Fundamental is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 8,609 in American Funds Fundamental on August 26, 2024 and sell it today you would earn a total of 156.00 from holding American Funds Fundamental or generate 1.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tax Exempt Fund Of vs. American Funds Fundamental
Performance |
| Timeline |
| Tax Exempt Fund |
| American Funds Funda |
Tax Exempt and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tax Exempt and American Funds
The main advantage of trading using opposite Tax Exempt and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tax Exempt 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.| Tax Exempt vs. American High Income Municipal | Tax Exempt vs. California Intermediate Term Tax Free | Tax Exempt vs. Capital World Bond | Tax Exempt vs. Tax Exempt Bond |
| American Funds vs. T Rowe Price | American Funds vs. Eip Growth And | American Funds vs. Small Pany Growth | American Funds vs. Smallcap Growth 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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