Correlation Between Maryland Tax-free and American Beacon
Can any of the company-specific risk be diversified away by investing in both Maryland Tax-free and American Beacon 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 Maryland Tax-free and American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Maryland Tax Free Bond and American Beacon Intl, you can compare the effects of market volatilities on Maryland Tax-free and American Beacon 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 Maryland Tax-free with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maryland Tax-free and American Beacon.
Diversification Opportunities for Maryland Tax-free and American Beacon
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Maryland and American is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Maryland Tax Free Bond and American Beacon Intl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Intl and Maryland 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 Maryland Tax Free Bond are associated (or correlated) with American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Intl has no effect on the direction of Maryland Tax-free i.e., Maryland Tax-free and American Beacon go up and down completely randomly.
Pair Corralation between Maryland Tax-free and American Beacon
Assuming the 90 days horizon Maryland Tax-free is expected to generate 1.22 times less return on investment than American Beacon. But when comparing it to its historical volatility, Maryland Tax Free Bond is 3.04 times less risky than American Beacon. It trades about 0.08 of its potential returns per unit of risk. American Beacon Intl is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,749 in American Beacon Intl on August 26, 2024 and sell it today you would earn a total of 137.00 from holding American Beacon Intl or generate 7.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Maryland Tax Free Bond vs. American Beacon Intl
Performance |
| Timeline |
| Maryland Tax Free |
| American Beacon Intl |
Maryland Tax-free and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Maryland Tax-free and American Beacon
The main advantage of trading using opposite Maryland Tax-free and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maryland Tax-free position performs unexpectedly, American Beacon 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 Beacon will offset losses from the drop in American Beacon's long position.| Maryland Tax-free vs. Prudential Real Estate | Maryland Tax-free vs. Forum Real Estate | Maryland Tax-free vs. Pender Real Estate | Maryland Tax-free vs. Great West Real Estate |
| American Beacon vs. Barings Active Short | American Beacon vs. Limited Term Tax | American Beacon vs. T Rowe Price | American Beacon vs. Maryland Tax Free Bond |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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