Correlation Between Maryland Tax-free and Amcap Fund
Can any of the company-specific risk be diversified away by investing in both Maryland Tax-free and Amcap Fund 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 Amcap Fund 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 Amcap Fund Class, you can compare the effects of market volatilities on Maryland Tax-free and Amcap Fund 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 Amcap Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maryland Tax-free and Amcap Fund.
Diversification Opportunities for Maryland Tax-free and Amcap Fund
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Maryland and Amcap is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Maryland Tax Free Bond and Amcap Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amcap Fund Class 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 Amcap Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amcap Fund Class has no effect on the direction of Maryland Tax-free i.e., Maryland Tax-free and Amcap Fund go up and down completely randomly.
Pair Corralation between Maryland Tax-free and Amcap Fund
Assuming the 90 days horizon Maryland Tax-free is expected to generate 5.37 times less return on investment than Amcap Fund. But when comparing it to its historical volatility, Maryland Tax Free Bond is 3.65 times less risky than Amcap Fund. It trades about 0.09 of its potential returns per unit of risk. Amcap Fund Class is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 3,391 in Amcap Fund Class on October 20, 2024 and sell it today you would earn a total of 72.00 from holding Amcap Fund Class or generate 2.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Maryland Tax Free Bond vs. Amcap Fund Class
Performance |
| Timeline |
| Maryland Tax Free |
| Amcap Fund Class |
Maryland Tax-free and Amcap Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Maryland Tax-free and Amcap Fund
The main advantage of trading using opposite Maryland Tax-free and Amcap Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maryland Tax-free position performs unexpectedly, Amcap Fund 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 Amcap Fund will offset losses from the drop in Amcap Fund's long position.| Maryland Tax-free vs. Rbb Fund | Maryland Tax-free vs. Commodities Strategy Fund | Maryland Tax-free vs. Predex Funds | Maryland Tax-free vs. Federated Global Allocation |
| Amcap Fund vs. Metropolitan West Porate | Amcap Fund vs. Pioneer Amt Free Municipal | Amcap Fund vs. Franklin Government Money | Amcap Fund 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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