Correlation Between Transamerica Intermediate and Hawaii Municipal
Can any of the company-specific risk be diversified away by investing in both Transamerica Intermediate and Hawaii 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 Transamerica Intermediate and Hawaii Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transamerica Intermediate Muni and Hawaii Municipal Bond, you can compare the effects of market volatilities on Transamerica Intermediate and Hawaii 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 Transamerica Intermediate with a short position of Hawaii Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Intermediate and Hawaii Municipal.
Diversification Opportunities for Transamerica Intermediate and Hawaii Municipal
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Transamerica and Hawaii is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Intermediate Muni and Hawaii Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawaii Municipal Bond and Transamerica Intermediate 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 Transamerica Intermediate Muni are associated (or correlated) with Hawaii Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawaii Municipal Bond has no effect on the direction of Transamerica Intermediate i.e., Transamerica Intermediate and Hawaii Municipal go up and down completely randomly.
Pair Corralation between Transamerica Intermediate and Hawaii Municipal
Assuming the 90 days horizon Transamerica Intermediate Muni is expected to generate 1.39 times more return on investment than Hawaii Municipal. However, Transamerica Intermediate is 1.39 times more volatile than Hawaii Municipal Bond. It trades about 0.05 of its potential returns per unit of risk. Hawaii Municipal Bond is currently generating about 0.03 per unit of risk. If you would invest 1,019 in Transamerica Intermediate Muni on August 27, 2024 and sell it today you would earn a total of 60.00 from holding Transamerica Intermediate Muni or generate 5.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transamerica Intermediate Muni vs. Hawaii Municipal Bond
Performance |
| Timeline |
| Transamerica Intermediate |
| Hawaii Municipal Bond |
Transamerica Intermediate and Hawaii Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Intermediate and Hawaii Municipal
The main advantage of trading using opposite Transamerica Intermediate and Hawaii Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Intermediate position performs unexpectedly, Hawaii 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 Hawaii Municipal will offset losses from the drop in Hawaii Municipal's long position.The idea behind Transamerica Intermediate Muni and Hawaii Municipal Bond pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Hawaii Municipal vs. Hawaii Municipal Bond | Hawaii Municipal vs. American Funds Fundamental | Hawaii Municipal vs. American Mutual Fund | Hawaii Municipal vs. Pimco High Income |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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