Correlation Between New York and Ab Arizona

Can any of the company-specific risk be diversified away by investing in both New York and Ab Arizona 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 New York and Ab Arizona into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between New York Municipal and Ab Arizona Portfolio, you can compare the effects of market volatilities on New York and Ab Arizona 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 New York with a short position of Ab Arizona. Check out your portfolio center. Please also check ongoing floating volatility patterns of New York and Ab Arizona.

Diversification Opportunities for New York and Ab Arizona

0.98

Correlation Coefficient

New York  Ab Arizona

Almost no diversification

The 3 months correlation between New and AAZAX is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding New York Municipal and Ab Arizona Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Arizona Portfolio and New York 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 New York Municipal are associated (or correlated) with Ab Arizona. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Arizona Portfolio has no effect on the direction of New York i.e., New York and Ab Arizona go up and down completely randomly.

Pair Corralation between New York and Ab Arizona

Assuming the 90 days horizon New York is expected to generate 1.3 times less return on investment than Ab Arizona. But when comparing it to its historical volatility, New York Municipal is 1.39 times less risky than Ab Arizona. It trades about 0.06 of its potential returns per unit of risk. Ab Arizona Portfolio is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,043  in Ab Arizona Portfolio on September 4, 2024 and sell it today you would earn a total of  7.00  from holding Ab Arizona Portfolio or generate 0.67% return on investment over 90 days.

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

New York Municipal  vs.  Ab Arizona Portfolio

New York Municipal

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New York Municipal are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, New York is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ab Arizona Portfolio

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Arizona Portfolio are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ab Arizona is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with New York and Ab Arizona

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

The idea behind New York Municipal and Ab Arizona Portfolio 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.