Correlation Between Municipal Bond and Morningstar Municipal
Can any of the company-specific risk be diversified away by investing in both Municipal Bond and Morningstar 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 Municipal Bond and Morningstar Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Municipal Bond Fund and Morningstar Municipal Bond, you can compare the effects of market volatilities on Municipal Bond and Morningstar 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 Municipal Bond with a short position of Morningstar Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Municipal Bond and Morningstar Municipal.
Diversification Opportunities for Municipal Bond and Morningstar Municipal
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Municipal and Morningstar is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Municipal Bond Fund and Morningstar Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morningstar Municipal and Municipal Bond 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 Municipal Bond Fund are associated (or correlated) with Morningstar Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morningstar Municipal has no effect on the direction of Municipal Bond i.e., Municipal Bond and Morningstar Municipal go up and down completely randomly.
Pair Corralation between Municipal Bond and Morningstar Municipal
Assuming the 90 days horizon Municipal Bond is expected to generate 1.08 times less return on investment than Morningstar Municipal. In addition to that, Municipal Bond is 1.07 times more volatile than Morningstar Municipal Bond. It trades about 0.14 of its total potential returns per unit of risk. Morningstar Municipal Bond is currently generating about 0.16 per unit of volatility. If you would invest 973.00 in Morningstar Municipal Bond on September 1, 2024 and sell it today you would earn a total of 35.00 from holding Morningstar Municipal Bond or generate 3.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Municipal Bond Fund vs. Morningstar Municipal Bond
Performance |
| Timeline |
| Municipal Bond |
| Morningstar Municipal |
Municipal Bond and Morningstar Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Municipal Bond and Morningstar Municipal
The main advantage of trading using opposite Municipal Bond and Morningstar Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Municipal Bond position performs unexpectedly, Morningstar 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 Morningstar Municipal will offset losses from the drop in Morningstar Municipal's long position.| Municipal Bond vs. Wells Fargo Advantage | Municipal Bond vs. Wells Fargo Advantage | Municipal Bond vs. Wells Fargo Advantage | Municipal Bond vs. Wells Fargo Ultra |
| Morningstar Municipal vs. Dws Government Money | Morningstar Municipal vs. Virtus Seix Government | Morningstar Municipal vs. Ab Government Exchange | Morningstar Municipal vs. Franklin Adjustable Government |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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