Correlation Between SPACE and Tax Exempt

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

By analyzing existing cross correlation between SPACE and Tax Exempt Bond, you can compare the effects of market volatilities on SPACE and Tax Exempt 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 SPACE with a short position of Tax Exempt. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPACE and Tax Exempt.

Diversification Opportunities for SPACE and Tax Exempt

0.52

Correlation Coefficient

SPACE  Tax Exempt

Very weak diversification

The 3 months correlation between SPACE and Tax is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding SPACE and Tax Exempt Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Exempt Bond and SPACE 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 SPACE are associated (or correlated) with Tax Exempt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Exempt Bond has no effect on the direction of SPACE i.e., SPACE and Tax Exempt go up and down completely randomly.

Pair Corralation between SPACE and Tax Exempt

Assuming the 90 days horizon SPACE is expected to under-perform the Tax Exempt. In addition to that, SPACE is 29.97 times more volatile than Tax Exempt Bond. It trades about -0.16 of its total potential returns per unit of risk. Tax Exempt Bond is currently generating about -0.34 per unit of volatility. If you would invest  1,261  in Tax Exempt Bond on October 4, 2024 and sell it today you would lose (21.00) from holding Tax Exempt Bond or give up 1.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

SPACE  vs.  Tax Exempt Bond

SPACE

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPACE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, SPACE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Tax Exempt Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SPACE and Tax Exempt

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

The idea behind SPACE and Tax Exempt Bond 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.