Correlation Between Kentucky Tax-free and Boston Partners

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

By analyzing existing cross correlation between Kentucky Tax Free Short To Medium and Boston Partners Longshort, you can compare the effects of market volatilities on Kentucky Tax-free and Boston Partners 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 Kentucky Tax-free with a short position of Boston Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kentucky Tax-free and Boston Partners.

Diversification Opportunities for Kentucky Tax-free and Boston Partners

0.16

Correlation Coefficient

Kentucky Tax-free  Boston Partners

Average diversification

The 3 months correlation between Kentucky and Boston is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Kentucky Tax Free Short To Med and Boston Partners Longshort in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Partners Longshort and Kentucky Tax-free 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 Kentucky Tax Free Short To Medium are associated (or correlated) with Boston Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Partners Longshort has no effect on the direction of Kentucky Tax-free i.e., Kentucky Tax-free and Boston Partners go up and down completely randomly.

Pair Corralation between Kentucky Tax-free and Boston Partners

Assuming the 90 days horizon Kentucky Tax-free is expected to generate 1.64 times less return on investment than Boston Partners. But when comparing it to its historical volatility, Kentucky Tax Free Short To Medium is 5.97 times less risky than Boston Partners. It trades about 0.13 of its potential returns per unit of risk. Boston Partners Longshort is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,348  in Boston Partners Longshort on December 29, 2024 and sell it today you would earn a total of  16.00  from holding Boston Partners Longshort or generate 1.19% return on investment over 90 days.

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

Kentucky Tax Free Short To Med  vs.  Boston Partners Longshort

Kentucky Tax Free

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kentucky Tax Free Short To Medium are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Kentucky Tax-free is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Boston Partners Longshort

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Partners Longshort are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Boston Partners is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kentucky Tax-free and Boston Partners

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

The idea behind Kentucky Tax Free Short To Medium and Boston Partners Longshort 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.