Correlation Between Fixed Income and Ab Municipal

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

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

Diversification Opportunities for Fixed Income and Ab Municipal

0.8

Correlation Coefficient

Fixed Income  Ab Municipal

Very poor diversification

The 3 months correlation between Fixed and MISHX is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Fixed Income Shares and Ab Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Municipal Income and Fixed Income 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 Fixed Income Shares are associated (or correlated) with Ab Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Municipal Income has no effect on the direction of Fixed Income i.e., Fixed Income and Ab Municipal go up and down completely randomly.

Pair Corralation between Fixed Income and Ab Municipal

Assuming the 90 days horizon Fixed Income Shares is expected to under-perform the Ab Municipal. In addition to that, Fixed Income is 1.22 times more volatile than Ab Municipal Income. It trades about -0.02 of its total potential returns per unit of risk. Ab Municipal Income is currently generating about 0.05 per unit of volatility. If you would invest  1,128  in Ab Municipal Income on August 31, 2024 and sell it today you would earn a total of  9.00  from holding Ab Municipal Income or generate 0.8% return on investment over 90 days.

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

Fixed Income Shares  vs.  Ab Municipal Income

Fixed Income Shares

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ab Municipal Income

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Municipal Income are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Ab 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 Fixed Income and Ab Municipal

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

The idea behind Fixed Income Shares and Ab Municipal Income 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.