Correlation Between Tax Exempt and Washington Mutual
Can any of the company-specific risk be diversified away by investing in both Tax Exempt and Washington Mutual 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 Washington Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tax Exempt Bond and Washington Mutual Investors, you can compare the effects of market volatilities on Tax Exempt and Washington Mutual 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 Washington Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tax Exempt and Washington Mutual.
Diversification Opportunities for Tax Exempt and Washington Mutual
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tax and Washington is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Tax Exempt Bond and Washington Mutual Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Mutual 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 Bond are associated (or correlated) with Washington Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Washington Mutual has no effect on the direction of Tax Exempt i.e., Tax Exempt and Washington Mutual go up and down completely randomly.
Pair Corralation between Tax Exempt and Washington Mutual
Assuming the 90 days horizon Tax Exempt is expected to generate 3.23 times less return on investment than Washington Mutual. But when comparing it to its historical volatility, Tax Exempt Bond is 3.35 times less risky than Washington Mutual. It trades about 0.06 of its potential returns per unit of risk. Washington Mutual Investors is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 5,180 in Washington Mutual Investors on November 5, 2024 and sell it today you would earn a total of 1,212 from holding Washington Mutual Investors or generate 23.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tax Exempt Bond vs. Washington Mutual Investors
Performance |
| Timeline |
| Tax Exempt Bond |
| Washington Mutual |
Tax Exempt and Washington Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tax Exempt and Washington Mutual
The main advantage of trading using opposite Tax Exempt and Washington Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tax Exempt position performs unexpectedly, Washington Mutual 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 Washington Mutual will offset losses from the drop in Washington Mutual's long position.| Tax Exempt vs. Ab Bond Inflation | Tax Exempt vs. Gmo Emerging Ntry | Tax Exempt vs. Multisector Bond Sma | Tax Exempt vs. Bbh Intermediate Municipal |
| Washington Mutual vs. Lord Abbett Inflation | Washington Mutual vs. Ab Bond Inflation | Washington Mutual vs. Short Duration Inflation | Washington Mutual vs. Ab Bond Inflation |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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