Correlation Between Global Gold and Tax Exempt

Can any of the company-specific risk be diversified away by investing in both Global Gold and Tax Exempt 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 Global Gold and Tax Exempt into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global Gold Fund and Tax Exempt Intermediate Term, you can compare the effects of market volatilities on Global Gold and Tax Exempt 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 Global Gold with a short position of Tax Exempt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Gold and Tax Exempt.

Diversification Opportunities for Global Gold and Tax Exempt

0.05

Correlation Coefficient

Global Gold  Tax Exempt

Significant diversification

The 3 months correlation between Global and Tax is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Global Gold Fund and Tax Exempt Intermediate Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Exempt Intermediate and Global Gold 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 Global Gold Fund are associated (or correlated) with Tax Exempt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Exempt Intermediate has no effect on the direction of Global Gold i.e., Global Gold and Tax Exempt go up and down completely randomly.

Pair Corralation between Global Gold and Tax Exempt

Assuming the 90 days horizon Global Gold Fund is expected to under-perform the Tax Exempt. In addition to that, Global Gold is 7.75 times more volatile than Tax Exempt Intermediate Term. It trades about -0.06 of its total potential returns per unit of risk. Tax Exempt Intermediate Term is currently generating about 0.02 per unit of volatility. If you would invest  1,245  in Tax Exempt Intermediate Term on October 26, 2024 and sell it today you would earn a total of  4.00  from holding Tax Exempt Intermediate Term or generate 0.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Global Gold Fund  vs.  Tax Exempt Intermediate Term

Global Gold Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Gold Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Tax Exempt Intermediate

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tax Exempt Intermediate Term are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Tax Exempt is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global Gold and Tax Exempt

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

The idea behind Global Gold Fund and Tax Exempt Intermediate Term 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.