Correlation Between Target 2005 and Oklahoma Municipal
Can any of the company-specific risk be diversified away by investing in both Target 2005 and Oklahoma Municipal 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 Target 2005 and Oklahoma Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Target 2005 Fund and Oklahoma Municipal Fund, you can compare the effects of market volatilities on Target 2005 and Oklahoma Municipal 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 Target 2005 with a short position of Oklahoma Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target 2005 and Oklahoma Municipal.
Diversification Opportunities for Target 2005 and Oklahoma Municipal
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Target and Oklahoma is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Target 2005 Fund and Oklahoma Municipal Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oklahoma Municipal and Target 2005 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 Target 2005 Fund are associated (or correlated) with Oklahoma Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oklahoma Municipal has no effect on the direction of Target 2005 i.e., Target 2005 and Oklahoma Municipal go up and down completely randomly.
Pair Corralation between Target 2005 and Oklahoma Municipal
Assuming the 90 days horizon Target 2005 Fund is expected to generate 0.74 times more return on investment than Oklahoma Municipal. However, Target 2005 Fund is 1.35 times less risky than Oklahoma Municipal. It trades about 0.37 of its potential returns per unit of risk. Oklahoma Municipal Fund is currently generating about 0.22 per unit of risk. If you would invest 1,162 in Target 2005 Fund on September 1, 2024 and sell it today you would earn a total of 23.00 from holding Target 2005 Fund or generate 1.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Target 2005 Fund vs. Oklahoma Municipal Fund
Performance |
| Timeline |
| Target 2005 Fund |
| Oklahoma Municipal |
Target 2005 and Oklahoma Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Target 2005 and Oklahoma Municipal
The main advantage of trading using opposite Target 2005 and Oklahoma Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target 2005 position performs unexpectedly, Oklahoma Municipal 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 Oklahoma Municipal will offset losses from the drop in Oklahoma Municipal's long position.| Target 2005 vs. T Rowe Price | Target 2005 vs. T Rowe Price | Target 2005 vs. T Rowe Price | Target 2005 vs. T Rowe Price |
| Oklahoma Municipal vs. Mesirow Financial Small | Oklahoma Municipal vs. Transamerica Financial Life | Oklahoma Municipal vs. 1919 Financial Services | Oklahoma Municipal vs. Angel Oak Financial |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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