Correlation Between Maryland Tax-free and Eafe Fund
Can any of the company-specific risk be diversified away by investing in both Maryland Tax-free and Eafe 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 Eafe 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 The Eafe Fund, you can compare the effects of market volatilities on Maryland Tax-free and Eafe 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 Eafe Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maryland Tax-free and Eafe Fund.
Diversification Opportunities for Maryland Tax-free and Eafe Fund
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Maryland and Eafe is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Maryland Tax Free Bond and The Eafe Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eafe Fund 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 Eafe Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eafe Fund has no effect on the direction of Maryland Tax-free i.e., Maryland Tax-free and Eafe Fund go up and down completely randomly.
Pair Corralation between Maryland Tax-free and Eafe Fund
Assuming the 90 days horizon Maryland Tax Free Bond is expected to generate 0.12 times more return on investment than Eafe Fund. However, Maryland Tax Free Bond is 8.5 times less risky than Eafe Fund. It trades about 0.09 of its potential returns per unit of risk. The Eafe Fund is currently generating about -0.16 per unit of risk. If you would invest 1,002 in Maryland Tax Free Bond on October 25, 2024 and sell it today you would earn a total of 4.00 from holding Maryland Tax Free Bond or generate 0.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Maryland Tax Free Bond vs. The Eafe Fund
Performance |
| Timeline |
| Maryland Tax Free |
| Eafe Fund |
Maryland Tax-free and Eafe Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Maryland Tax-free and Eafe Fund
The main advantage of trading using opposite Maryland Tax-free and Eafe Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maryland Tax-free position performs unexpectedly, Eafe 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 Eafe Fund will offset losses from the drop in Eafe Fund's long position.| Maryland Tax-free vs. Simt Real Estate | Maryland Tax-free vs. Jhancock Real Estate | Maryland Tax-free vs. Columbia Real Estate | Maryland Tax-free vs. Baron Real Estate |
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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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