Correlation Between Absolute Convertible and Hawaiian Tax-free

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

By analyzing existing cross correlation between Absolute Convertible Arbitrage and Hawaiian Tax Free Trust, you can compare the effects of market volatilities on Absolute Convertible and Hawaiian Tax-free 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 Absolute Convertible with a short position of Hawaiian Tax-free. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Convertible and Hawaiian Tax-free.

Diversification Opportunities for Absolute Convertible and Hawaiian Tax-free

0.49

Correlation Coefficient

Absolute Convertible  Hawaiian Tax-free

Very weak diversification

The 3 months correlation between Absolute and Hawaiian is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Convertible Arbitrage and Hawaiian Tax Free Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawaiian Tax Free and Absolute Convertible 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 Absolute Convertible Arbitrage are associated (or correlated) with Hawaiian Tax-free. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawaiian Tax Free has no effect on the direction of Absolute Convertible i.e., Absolute Convertible and Hawaiian Tax-free go up and down completely randomly.

Pair Corralation between Absolute Convertible and Hawaiian Tax-free

Assuming the 90 days horizon Absolute Convertible Arbitrage is expected to under-perform the Hawaiian Tax-free. In addition to that, Absolute Convertible is 2.39 times more volatile than Hawaiian Tax Free Trust. It trades about -0.31 of its total potential returns per unit of risk. Hawaiian Tax Free Trust is currently generating about -0.32 per unit of volatility. If you would invest  1,065  in Hawaiian Tax Free Trust on October 10, 2024 and sell it today you would lose (14.00) from holding Hawaiian Tax Free Trust or give up 1.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Absolute Convertible Arbitrage  vs.  Hawaiian Tax Free Trust

Absolute Convertible

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hawaiian Tax Free

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Absolute Convertible and Hawaiian Tax-free

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

The idea behind Absolute Convertible Arbitrage and Hawaiian Tax Free Trust 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.