Correlation Between Wilmington Diversified and Wilmington Municipal
Can any of the company-specific risk be diversified away by investing in both Wilmington Diversified and Wilmington 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 Wilmington 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 Wilmington Municipal Bond, you can compare the effects of market volatilities on Wilmington Diversified and Wilmington 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 Wilmington Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wilmington Diversified and Wilmington Municipal.
Diversification Opportunities for Wilmington Diversified and Wilmington Municipal
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Wilmington and Wilmington is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Wilmington Diversified Income and Wilmington Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilmington 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 Wilmington Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilmington Municipal Bond has no effect on the direction of Wilmington Diversified i.e., Wilmington Diversified and Wilmington Municipal go up and down completely randomly.
Pair Corralation between Wilmington Diversified and Wilmington Municipal
Assuming the 90 days horizon Wilmington Diversified Income is expected to generate 3.81 times more return on investment than Wilmington Municipal. However, Wilmington Diversified is 3.81 times more volatile than Wilmington Municipal Bond. It trades about 0.06 of its potential returns per unit of risk. Wilmington Municipal Bond is currently generating about 0.07 per unit of risk. If you would invest 1,136 in Wilmington Diversified Income on August 29, 2024 and sell it today you would earn a total of 273.00 from holding Wilmington Diversified Income or generate 24.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wilmington Diversified Income vs. Wilmington Municipal Bond
Performance |
| Timeline |
| Wilmington Diversified |
| Wilmington Municipal Bond |
Wilmington Diversified and Wilmington Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wilmington Diversified and Wilmington Municipal
The main advantage of trading using opposite Wilmington Diversified and Wilmington Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wilmington Diversified position performs unexpectedly, Wilmington 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 Wilmington Municipal will offset losses from the drop in Wilmington Municipal's long position.| Wilmington Diversified vs. Ab Municipal Bond | Wilmington Diversified vs. The Hartford Inflation | Wilmington Diversified vs. Goldman Sachs Inflation | Wilmington Diversified vs. Ab Bond Inflation |
| Wilmington Municipal vs. Federated Government Ultrashort | Wilmington Municipal vs. Dws Government Money | Wilmington Municipal vs. Us Government Plus | Wilmington Municipal vs. Aig Government Money |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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