Correlation Between Kentucky Tax-free and Homestead Intermediate

Can any of the company-specific risk be diversified away by investing in both Kentucky Tax-free and Homestead Intermediate 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 Homestead Intermediate 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 Homestead Intermediate Bond, you can compare the effects of market volatilities on Kentucky Tax-free and Homestead Intermediate 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 Homestead Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kentucky Tax-free and Homestead Intermediate.

Diversification Opportunities for Kentucky Tax-free and Homestead Intermediate

0.93

Correlation Coefficient

Kentucky Tax-free  Homestead Intermediate

Almost no diversification

The 3 months correlation between Kentucky and Homestead is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Kentucky Tax Free Short To Med and Homestead Intermediate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homestead Intermediate 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 Homestead Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homestead Intermediate has no effect on the direction of Kentucky Tax-free i.e., Kentucky Tax-free and Homestead Intermediate go up and down completely randomly.

Pair Corralation between Kentucky Tax-free and Homestead Intermediate

Assuming the 90 days horizon Kentucky Tax-free is expected to generate 2.56 times less return on investment than Homestead Intermediate. But when comparing it to its historical volatility, Kentucky Tax Free Short To Medium is 3.07 times less risky than Homestead Intermediate. It trades about 0.13 of its potential returns per unit of risk. Homestead Intermediate Bond is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  449.00  in Homestead Intermediate Bond on December 30, 2024 and sell it today you would earn a total of  9.00  from holding Homestead Intermediate Bond or generate 2.0% return on investment over 90 days.

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

Kentucky Tax Free Short To Med  vs.  Homestead Intermediate Bond

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.

Homestead Intermediate

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Homestead Intermediate Bond are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Homestead Intermediate 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 Homestead Intermediate

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

The idea behind Kentucky Tax Free Short To Medium and Homestead Intermediate 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.

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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.