Correlation Between Intermediate-term and Maryland Tax-free
Can any of the company-specific risk be diversified away by investing in both Intermediate-term and Maryland Tax-free 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 Maryland Tax-free into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intermediate Term Bond Fund and Maryland Tax Free Bond, you can compare the effects of market volatilities on Intermediate-term and Maryland Tax-free 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 Maryland Tax-free. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intermediate-term and Maryland Tax-free.
Diversification Opportunities for Intermediate-term and Maryland Tax-free
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Intermediate-term and Maryland is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Term Bond Fund and Maryland Tax Free Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maryland Tax Free 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 Bond Fund are associated (or correlated) with Maryland Tax-free. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maryland Tax Free has no effect on the direction of Intermediate-term i.e., Intermediate-term and Maryland Tax-free go up and down completely randomly.
Pair Corralation between Intermediate-term and Maryland Tax-free
Assuming the 90 days horizon Intermediate Term Bond Fund is expected to under-perform the Maryland Tax-free. But the mutual fund apears to be less risky and, when comparing its historical volatility, Intermediate Term Bond Fund is 1.19 times less risky than Maryland Tax-free. The mutual fund trades about -0.46 of its potential returns per unit of risk. The Maryland Tax Free Bond is currently generating about -0.38 of returns per unit of risk over similar time horizon. If you would invest 1,026 in Maryland Tax Free Bond on October 12, 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 |
Intermediate Term Bond Fund vs. Maryland Tax Free Bond
Performance |
| Timeline |
| Intermediate Term Bond |
| Maryland Tax Free |
Intermediate-term and Maryland Tax-free Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Intermediate-term and Maryland Tax-free
The main advantage of trading using opposite Intermediate-term and Maryland Tax-free positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intermediate-term position performs unexpectedly, Maryland Tax-free 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 Maryland Tax-free will offset losses from the drop in Maryland Tax-free's long position.| Intermediate-term vs. Qs Large Cap | Intermediate-term vs. Pace Large Value | Intermediate-term vs. Fisher Large Cap | Intermediate-term vs. Calvert Large Cap |
| 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 |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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