Correlation Between Wilmington Municipal and Wilmington International
Can any of the company-specific risk be diversified away by investing in both Wilmington Municipal and Wilmington International 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 International 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 International Fund, you can compare the effects of market volatilities on Wilmington Municipal and Wilmington International 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 International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wilmington Municipal and Wilmington International.
Diversification Opportunities for Wilmington Municipal and Wilmington International
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Wilmington and Wilmington is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Wilmington Municipal Bond and Wilmington International Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilmington International 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 International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilmington International has no effect on the direction of Wilmington Municipal i.e., Wilmington Municipal and Wilmington International go up and down completely randomly.
Pair Corralation between Wilmington Municipal and Wilmington International
Assuming the 90 days horizon Wilmington Municipal is expected to generate 3.13 times less return on investment than Wilmington International. But when comparing it to its historical volatility, Wilmington Municipal Bond is 3.99 times less risky than Wilmington International. It trades about 0.06 of its potential returns per unit of risk. Wilmington International Fund is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 764.00 in Wilmington International Fund on August 26, 2024 and sell it today you would earn a total of 144.00 from holding Wilmington International Fund or generate 18.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wilmington Municipal Bond vs. Wilmington International Fund
Performance |
| Timeline |
| Wilmington Municipal Bond |
| Wilmington International |
Wilmington Municipal and Wilmington International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wilmington Municipal and Wilmington International
The main advantage of trading using opposite Wilmington Municipal and Wilmington International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wilmington Municipal position performs unexpectedly, Wilmington International 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 International will offset losses from the drop in Wilmington International'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 |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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