Correlation Between Maryland Tax-free and Bats Series
Can any of the company-specific risk be diversified away by investing in both Maryland Tax-free and Bats Series 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 Bats Series 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 Bats Series M, you can compare the effects of market volatilities on Maryland Tax-free and Bats Series 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 Bats Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maryland Tax-free and Bats Series.
Diversification Opportunities for Maryland Tax-free and Bats Series
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Maryland and BATS is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Maryland Tax Free Bond and Bats Series M in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bats Series M 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 Bats Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bats Series M has no effect on the direction of Maryland Tax-free i.e., Maryland Tax-free and Bats Series go up and down completely randomly.
Pair Corralation between Maryland Tax-free and Bats Series
Assuming the 90 days horizon Maryland Tax Free Bond is expected to generate 1.04 times more return on investment than Bats Series. However, Maryland Tax-free is 1.04 times more volatile than Bats Series M. It trades about -0.37 of its potential returns per unit of risk. Bats Series M is currently generating about -0.53 per unit of risk. If you would invest 1,026 in Maryland Tax Free Bond on October 11, 2024 and sell it today you would lose (22.00) from holding Maryland Tax Free Bond or give up 2.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Maryland Tax Free Bond vs. Bats Series M
Performance |
| Timeline |
| Maryland Tax Free |
| Bats Series M |
Maryland Tax-free and Bats Series Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Maryland Tax-free and Bats Series
The main advantage of trading using opposite Maryland Tax-free and Bats Series positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maryland Tax-free position performs unexpectedly, Bats Series 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 Bats Series will offset losses from the drop in Bats Series' long position.| Maryland Tax-free vs. Morningstar Defensive Bond | Maryland Tax-free vs. Intermediate Term Bond Fund | Maryland Tax-free vs. Dws Government Money | Maryland Tax-free vs. Western Asset Municipal |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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