Correlation Between Intermediate Term and Nebraska Municipal
Can any of the company-specific risk be diversified away by investing in both Intermediate Term and Nebraska 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 Intermediate Term and Nebraska Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intermediate Term Tax Free Bond and Nebraska Municipal Fund, you can compare the effects of market volatilities on Intermediate Term and Nebraska 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 Intermediate Term with a short position of Nebraska Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intermediate Term and Nebraska Municipal.
Diversification Opportunities for Intermediate Term and Nebraska Municipal
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Intermediate and Nebraska is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Term Tax Free Bon and Nebraska Municipal Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nebraska Municipal and Intermediate Term 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 Intermediate Term Tax Free Bond are associated (or correlated) with Nebraska Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nebraska Municipal has no effect on the direction of Intermediate Term i.e., Intermediate Term and Nebraska Municipal go up and down completely randomly.
Pair Corralation between Intermediate Term and Nebraska Municipal
Assuming the 90 days horizon Intermediate Term is expected to generate 1.79 times less return on investment than Nebraska Municipal. But when comparing it to its historical volatility, Intermediate Term Tax Free Bond is 1.53 times less risky than Nebraska Municipal. It trades about 0.19 of its potential returns per unit of risk. Nebraska Municipal Fund is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 926.00 in Nebraska Municipal Fund on September 1, 2024 and sell it today you would earn a total of 17.00 from holding Nebraska Municipal Fund or generate 1.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Intermediate Term Tax Free Bon vs. Nebraska Municipal Fund
Performance |
| Timeline |
| Intermediate Term Tax |
| Nebraska Municipal |
Intermediate Term and Nebraska Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Intermediate Term and Nebraska Municipal
The main advantage of trading using opposite Intermediate Term and Nebraska Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intermediate Term position performs unexpectedly, Nebraska 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 Nebraska Municipal will offset losses from the drop in Nebraska Municipal's long position.| Intermediate Term vs. Calvert Conservative Allocation | Intermediate Term vs. Adams Diversified Equity | Intermediate Term vs. Lord Abbett Diversified | Intermediate Term vs. Aqr Diversified Arbitrage |
| Nebraska Municipal vs. Lord Abbett Convertible | Nebraska Municipal vs. Harbor Vertible Securities | Nebraska Municipal vs. Virtus Convertible | Nebraska Municipal vs. Rationalpier 88 Convertible |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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