Correlation Between Fixed Income and Aquila Tax

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

By analyzing existing cross correlation between The Fixed Income and Aquila Tax Free Trust, you can compare the effects of market volatilities on Fixed Income and Aquila Tax 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 Aquila Tax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fixed Income and Aquila Tax.

Diversification Opportunities for Fixed Income and Aquila Tax

0.78

Correlation Coefficient

Fixed Income  Aquila Tax

Poor diversification

The 3 months correlation between Fixed and Aquila is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding The Fixed Income and Aquila Tax Free Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aquila Tax Free 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 The Fixed Income are associated (or correlated) with Aquila Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aquila Tax Free has no effect on the direction of Fixed Income i.e., Fixed Income and Aquila Tax go up and down completely randomly.

Pair Corralation between Fixed Income and Aquila Tax

Assuming the 90 days horizon The Fixed Income is expected to generate 1.3 times more return on investment than Aquila Tax. However, Fixed Income is 1.3 times more volatile than Aquila Tax Free Trust. It trades about 0.05 of its potential returns per unit of risk. Aquila Tax Free Trust is currently generating about 0.01 per unit of risk. If you would invest  739.00  in The Fixed Income on September 13, 2024 and sell it today you would earn a total of  6.00  from holding The Fixed Income or generate 0.81% return on investment over 90 days.

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

The Fixed Income  vs.  Aquila Tax Free Trust

Fixed Income

Risk-Adjusted Performance

4 of 100

Insignificant

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

Aquila Tax Free

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aquila Tax Free Trust has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Aquila Tax 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 Aquila Tax

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

The idea behind The Fixed Income and Aquila 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.