Correlation Between Williston Basin/mid-north and Maine Municipal

Can any of the company-specific risk be diversified away by investing in both Williston Basin/mid-north and Maine 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 Williston Basin/mid-north and Maine Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Williston Basinmid North America and Maine Municipal Fund, you can compare the effects of market volatilities on Williston Basin/mid-north and Maine 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 Williston Basin/mid-north with a short position of Maine Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Williston Basin/mid-north and Maine Municipal.

Diversification Opportunities for Williston Basin/mid-north and Maine Municipal

-0.21

Correlation Coefficient

Williston Basin/mid-north  Maine Municipal

Very good diversification

The 3 months correlation between Williston and Maine is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Williston Basinmid North Ameri and Maine Municipal Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maine Municipal and Williston Basin/mid-north 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 Williston Basinmid North America are associated (or correlated) with Maine Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maine Municipal has no effect on the direction of Williston Basin/mid-north i.e., Williston Basin/mid-north and Maine Municipal go up and down completely randomly.

Pair Corralation between Williston Basin/mid-north and Maine Municipal

Assuming the 90 days horizon Williston Basinmid North America is expected to under-perform the Maine Municipal. In addition to that, Williston Basin/mid-north is 5.61 times more volatile than Maine Municipal Fund. It trades about -0.03 of its total potential returns per unit of risk. Maine Municipal Fund is currently generating about -0.07 per unit of volatility. If you would invest  955.00  in Maine Municipal Fund on December 1, 2024 and sell it today you would lose (10.00) from holding Maine Municipal Fund or give up 1.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Williston Basinmid North Ameri  vs.  Maine Municipal Fund

Williston Basin/mid-north

Risk-Adjusted Performance

Very Weak

Over the last 90 days Williston Basinmid North America has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Williston Basin/mid-north is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Maine Municipal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Maine Municipal Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Maine 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 Williston Basin/mid-north and Maine Municipal

The main advantage of trading using opposite Williston Basin/mid-north and Maine Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Williston Basin/mid-north position performs unexpectedly, Maine 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 Maine Municipal will offset losses from the drop in Maine Municipal's long position.

The idea behind Williston Basinmid North America and Maine Municipal Fund 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.