Correlation Between High-yield Municipal and CARPENTER

Can any of the company-specific risk be diversified away by investing in both High-yield Municipal and CARPENTER 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 CARPENTER 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 CARPENTER TECHNOLOGY P, you can compare the effects of market volatilities on High-yield Municipal and CARPENTER 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 CARPENTER. Check out your portfolio center. Please also check ongoing floating volatility patterns of High-yield Municipal and CARPENTER.

Diversification Opportunities for High-yield Municipal and CARPENTER

0.56

Correlation Coefficient

High-yield Municipal  CARPENTER

Very weak diversification

The 3 months correlation between High-yield and CARPENTER is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund and CARPENTER TECHNOLOGY P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARPENTER TECHNOLOGY 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 CARPENTER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARPENTER TECHNOLOGY has no effect on the direction of High-yield Municipal i.e., High-yield Municipal and CARPENTER go up and down completely randomly.

Pair Corralation between High-yield Municipal and CARPENTER

Assuming the 90 days horizon High Yield Municipal Fund is expected to generate 1.03 times more return on investment than CARPENTER. However, High-yield Municipal is 1.03 times more volatile than CARPENTER TECHNOLOGY P. It trades about -0.02 of its potential returns per unit of risk. CARPENTER TECHNOLOGY P is currently generating about -0.02 per unit of risk. If you would invest  897.00  in High Yield Municipal Fund on November 29, 2024 and sell it today you would lose (3.00) from holding High Yield Municipal Fund or give up 0.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.72%
Values	Daily Returns

High Yield Municipal Fund  vs.  CARPENTER TECHNOLOGY P

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.

CARPENTER TECHNOLOGY

Risk-Adjusted Performance

Very Weak

Over the last 90 days CARPENTER TECHNOLOGY P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CARPENTER is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with High-yield Municipal and CARPENTER

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

The idea behind High Yield Municipal Fund and CARPENTER TECHNOLOGY P 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.