Correlation Between Wilmington Municipal and Wilmington Broad
Can any of the company-specific risk be diversified away by investing in both Wilmington Municipal and Wilmington Broad 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 Municipal and Wilmington Broad into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wilmington Municipal Bond and Wilmington Broad Market, you can compare the effects of market volatilities on Wilmington Municipal and Wilmington Broad 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 Municipal with a short position of Wilmington Broad. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wilmington Municipal and Wilmington Broad.
Diversification Opportunities for Wilmington Municipal and Wilmington Broad
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wilmington and Wilmington is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Wilmington Municipal Bond and Wilmington Broad Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilmington Broad Market and Wilmington Municipal 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 Municipal Bond are associated (or correlated) with Wilmington Broad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilmington Broad Market has no effect on the direction of Wilmington Municipal i.e., Wilmington Municipal and Wilmington Broad go up and down completely randomly.
Pair Corralation between Wilmington Municipal and Wilmington Broad
Assuming the 90 days horizon Wilmington Municipal Bond is expected to generate 0.73 times more return on investment than Wilmington Broad. However, Wilmington Municipal Bond is 1.36 times less risky than Wilmington Broad. It trades about 0.13 of its potential returns per unit of risk. Wilmington Broad Market is currently generating about 0.06 per unit of risk. If you would invest 1,226 in Wilmington Municipal Bond on August 29, 2024 and sell it today you would earn a total of 9.00 from holding Wilmington Municipal Bond or generate 0.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wilmington Municipal Bond vs. Wilmington Broad Market
Performance |
| Timeline |
| Wilmington Municipal Bond |
| Wilmington Broad Market |
Wilmington Municipal and Wilmington Broad Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wilmington Municipal and Wilmington Broad
The main advantage of trading using opposite Wilmington Municipal and Wilmington Broad positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wilmington Municipal position performs unexpectedly, Wilmington Broad 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 Broad will offset losses from the drop in Wilmington Broad's long position.| Wilmington Municipal vs. Wilmington Global Alpha | Wilmington Municipal vs. Wilmington Global Alpha | Wilmington Municipal vs. Wilmington Broad Market | Wilmington Municipal vs. Wilmington Municipal Bond |
| Wilmington Broad vs. T Rowe Price | Wilmington Broad vs. Goldman Sachs Large | Wilmington Broad vs. Aqr Large Cap | Wilmington Broad vs. Qs Large Cap |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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