Correlation Between Wilmington Diversified and Ab Municipal
Can any of the company-specific risk be diversified away by investing in both Wilmington Diversified and Ab 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 Wilmington Diversified and Ab Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wilmington Diversified Income and Ab Municipal Bond, you can compare the effects of market volatilities on Wilmington Diversified and Ab 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 Wilmington Diversified with a short position of Ab Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wilmington Diversified and Ab Municipal.
Diversification Opportunities for Wilmington Diversified and Ab Municipal
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wilmington and AUNTX is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Wilmington Diversified Income and Ab Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Municipal Bond and Wilmington Diversified 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 Wilmington Diversified Income are associated (or correlated) with Ab Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Municipal Bond has no effect on the direction of Wilmington Diversified i.e., Wilmington Diversified and Ab Municipal go up and down completely randomly.
Pair Corralation between Wilmington Diversified and Ab Municipal
Assuming the 90 days horizon Wilmington Diversified is expected to generate 31.17 times less return on investment than Ab Municipal. In addition to that, Wilmington Diversified is 3.26 times more volatile than Ab Municipal Bond. It trades about 0.0 of its total potential returns per unit of risk. Ab Municipal Bond is currently generating about 0.25 per unit of volatility. If you would invest 1,069 in Ab Municipal Bond on November 27, 2024 and sell it today you would earn a total of 8.00 from holding Ab Municipal Bond or generate 0.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wilmington Diversified Income vs. Ab Municipal Bond
Performance |
| Timeline |
| Wilmington Diversified |
| Ab Municipal Bond |
Wilmington Diversified and Ab Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wilmington Diversified and Ab Municipal
The main advantage of trading using opposite Wilmington Diversified and Ab Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wilmington Diversified position performs unexpectedly, Ab 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 Ab Municipal will offset losses from the drop in Ab Municipal's long position.The idea behind Wilmington Diversified Income and Ab 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.
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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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