Correlation Between Extended Market and Victory Tax-exempt
Can any of the company-specific risk be diversified away by investing in both Extended Market and Victory Tax-exempt 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 Extended Market and Victory Tax-exempt into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Extended Market Index and Victory Tax Exempt Fund, you can compare the effects of market volatilities on Extended Market and Victory Tax-exempt 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 Extended Market with a short position of Victory Tax-exempt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extended Market and Victory Tax-exempt.
Diversification Opportunities for Extended Market and Victory Tax-exempt
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Extended and Victory is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Extended Market Index and Victory Tax Exempt Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory Tax Exempt and Extended Market 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 Extended Market Index are associated (or correlated) with Victory Tax-exempt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory Tax Exempt has no effect on the direction of Extended Market i.e., Extended Market and Victory Tax-exempt go up and down completely randomly.
Pair Corralation between Extended Market and Victory Tax-exempt
Assuming the 90 days horizon Extended Market Index is expected to generate 2.51 times more return on investment than Victory Tax-exempt. However, Extended Market is 2.51 times more volatile than Victory Tax Exempt Fund. It trades about 0.12 of its potential returns per unit of risk. Victory Tax Exempt Fund is currently generating about -0.05 per unit of risk. If you would invest 2,080 in Extended Market Index on November 4, 2024 and sell it today you would earn a total of 41.00 from holding Extended Market Index or generate 1.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Extended Market Index vs. Victory Tax Exempt Fund
Performance |
| Timeline |
| Extended Market Index |
| Victory Tax Exempt |
Extended Market and Victory Tax-exempt Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extended Market and Victory Tax-exempt
The main advantage of trading using opposite Extended Market and Victory Tax-exempt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extended Market position performs unexpectedly, Victory Tax-exempt 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 Victory Tax-exempt will offset losses from the drop in Victory Tax-exempt's long position.| Extended Market vs. Barings Global Floating | Extended Market vs. Tfa Alphagen Growth | Extended Market vs. Alliancebernstein Global Highome | Extended Market vs. Rbc Global Equity |
| Victory Tax-exempt vs. Transamerica High Yield | Victory Tax-exempt vs. Catalyst Exceed Defined | Victory Tax-exempt vs. Aqr Risk Parity | Victory Tax-exempt vs. Pace High Yield |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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