Correlation Between High-yield Municipal and Redbubble

Can any of the company-specific risk be diversified away by investing in both High-yield Municipal and Redbubble 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 High-yield Municipal and Redbubble into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between High Yield Municipal Fund and Redbubble Limited, you can compare the effects of market volatilities on High-yield Municipal and Redbubble 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 High-yield Municipal with a short position of Redbubble. Check out your portfolio center. Please also check ongoing floating volatility patterns of High-yield Municipal and Redbubble.

Diversification Opportunities for High-yield Municipal and Redbubble

-0.22

Correlation Coefficient

High-yield Municipal  Redbubble

Very good diversification

The 3 months correlation between High-yield and Redbubble is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund and Redbubble Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redbubble Limited and High-yield 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 High Yield Municipal Fund are associated (or correlated) with Redbubble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redbubble Limited has no effect on the direction of High-yield Municipal i.e., High-yield Municipal and Redbubble go up and down completely randomly.

Pair Corralation between High-yield Municipal and Redbubble

Assuming the 90 days horizon High Yield Municipal Fund is expected to generate 0.04 times more return on investment than Redbubble. However, High Yield Municipal Fund is 27.96 times less risky than Redbubble. It trades about -0.05 of its potential returns per unit of risk. Redbubble Limited is currently generating about -0.02 per unit of risk. If you would invest  876.00  in High Yield Municipal Fund on December 29, 2024 and sell it today you would lose (7.00) from holding High Yield Municipal Fund or give up 0.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

High Yield Municipal Fund  vs.  Redbubble Limited

High Yield Municipal

Risk-Adjusted Performance

Very Weak

Over the last 90 days High Yield Municipal Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, High-yield Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Redbubble Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Redbubble Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with High-yield Municipal and Redbubble

The main advantage of trading using opposite High-yield Municipal and Redbubble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High-yield Municipal position performs unexpectedly, Redbubble 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 Redbubble will offset losses from the drop in Redbubble's long position.

The idea behind High Yield Municipal Fund and Redbubble Limited 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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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.