Correlation Between Avantis Large and Oklahoma Municipal

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

By analyzing existing cross correlation between Avantis Large Cap and Oklahoma Municipal Fund, you can compare the effects of market volatilities on Avantis Large and Oklahoma Municipal 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 Avantis Large with a short position of Oklahoma Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avantis Large and Oklahoma Municipal.

Diversification Opportunities for Avantis Large and Oklahoma Municipal

0.11

Correlation Coefficient

Avantis Large  Oklahoma Municipal

Average diversification

The 3 months correlation between Avantis and Oklahoma is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Large Cap and Oklahoma Municipal Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oklahoma Municipal and Avantis Large 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 Avantis Large Cap are associated (or correlated) with Oklahoma Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oklahoma Municipal has no effect on the direction of Avantis Large i.e., Avantis Large and Oklahoma Municipal go up and down completely randomly.

Pair Corralation between Avantis Large and Oklahoma Municipal

Assuming the 90 days horizon Avantis Large Cap is expected to generate 3.61 times more return on investment than Oklahoma Municipal. However, Avantis Large is 3.61 times more volatile than Oklahoma Municipal Fund. It trades about 0.07 of its potential returns per unit of risk. Oklahoma Municipal Fund is currently generating about 0.03 per unit of risk. If you would invest  1,046  in Avantis Large Cap on September 21, 2024 and sell it today you would earn a total of  364.00  from holding Avantis Large Cap or generate 34.8% return on investment over 90 days.

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

Avantis Large Cap  vs.  Oklahoma Municipal Fund

Avantis Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avantis Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Avantis Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Oklahoma Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Avantis Large and Oklahoma Municipal

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

The idea behind Avantis Large Cap and Oklahoma Municipal Fund 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.

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.