Correlation Between Aquila Tax-free and Vanguard Emerging
Can any of the company-specific risk be diversified away by investing in both Aquila Tax-free and Vanguard Emerging 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 Aquila Tax-free and Vanguard Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aquila Tax Free Fund and Vanguard Emerging Markets, you can compare the effects of market volatilities on Aquila Tax-free and Vanguard Emerging 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 Aquila Tax-free with a short position of Vanguard Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aquila Tax-free and Vanguard Emerging.
Diversification Opportunities for Aquila Tax-free and Vanguard Emerging
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aquila and Vanguard is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Aquila Tax Free Fund and Vanguard Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Emerging Markets and Aquila Tax-free 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 Aquila Tax Free Fund are associated (or correlated) with Vanguard Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Emerging Markets has no effect on the direction of Aquila Tax-free i.e., Aquila Tax-free and Vanguard Emerging go up and down completely randomly.
Pair Corralation between Aquila Tax-free and Vanguard Emerging
Assuming the 90 days horizon Aquila Tax-free is expected to generate 7.45 times less return on investment than Vanguard Emerging. But when comparing it to its historical volatility, Aquila Tax Free Fund is 4.34 times less risky than Vanguard Emerging. It trades about 0.16 of its potential returns per unit of risk. Vanguard Emerging Markets is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 2,774 in Vanguard Emerging Markets on November 27, 2024 and sell it today you would earn a total of 109.00 from holding Vanguard Emerging Markets or generate 3.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aquila Tax Free Fund vs. Vanguard Emerging Markets
Performance |
| Timeline |
| Aquila Tax Free |
| Vanguard Emerging Markets |
Aquila Tax-free and Vanguard Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aquila Tax-free and Vanguard Emerging
The main advantage of trading using opposite Aquila Tax-free and Vanguard Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aquila Tax-free position performs unexpectedly, Vanguard Emerging 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 Vanguard Emerging will offset losses from the drop in Vanguard Emerging's long position.| Aquila Tax-free vs. John Hancock Financial | Aquila Tax-free vs. Mesirow Financial Small | Aquila Tax-free vs. Transamerica Financial Life | Aquila Tax-free vs. Financial Services Portfolio |
| Vanguard Emerging vs. Jhancock Diversified Macro | Vanguard Emerging vs. Franklin Federal Limited Term | Vanguard Emerging vs. Rbc Emerging Markets | Vanguard Emerging vs. Aqr Sustainable Long Short |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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