Correlation Between Short-intermediate and Maryland Short

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

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

Diversification Opportunities for Short-intermediate and Maryland Short

0.81

Correlation Coefficient

Short-intermediate  Maryland Short

Very poor diversification

The 3 months correlation between Short-intermediate and Maryland is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Short Intermediate Bond Fund and Maryland Short Term Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maryland Short Term and Short-intermediate 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 Short Intermediate Bond Fund are associated (or correlated) with Maryland Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maryland Short Term has no effect on the direction of Short-intermediate i.e., Short-intermediate and Maryland Short go up and down completely randomly.

Pair Corralation between Short-intermediate and Maryland Short

Assuming the 90 days horizon Short Intermediate Bond Fund is expected to under-perform the Maryland Short. In addition to that, Short-intermediate is 1.11 times more volatile than Maryland Short Term Tax Free. It trades about -0.05 of its total potential returns per unit of risk. Maryland Short Term Tax Free is currently generating about 0.05 per unit of volatility. If you would invest  511.00  in Maryland Short Term Tax Free on October 7, 2024 and sell it today you would earn a total of  1.00  from holding Maryland Short Term Tax Free or generate 0.2% return on investment over 90 days.

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

Short Intermediate Bond Fund  vs.  Maryland Short Term Tax Free

Short Intermediate Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Maryland Short Term

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Short-intermediate and Maryland Short

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

The idea behind Short Intermediate Bond Fund and Maryland Short Term Tax Free 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.