Correlation Between Nebraska Municipal and Scout Small

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

By analyzing existing cross correlation between Nebraska Municipal Fund and Scout Small Cap, you can compare the effects of market volatilities on Nebraska Municipal and Scout Small 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 Nebraska Municipal with a short position of Scout Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nebraska Municipal and Scout Small.

Diversification Opportunities for Nebraska Municipal and Scout Small

0.67

Correlation Coefficient

Nebraska Municipal  Scout Small

Poor diversification

The 3 months correlation between Nebraska and Scout is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Nebraska Municipal Fund and Scout Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scout Small Cap and Nebraska Municipal 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 Nebraska Municipal Fund are associated (or correlated) with Scout Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scout Small Cap has no effect on the direction of Nebraska Municipal i.e., Nebraska Municipal and Scout Small go up and down completely randomly.

Pair Corralation between Nebraska Municipal and Scout Small

Assuming the 90 days horizon Nebraska Municipal Fund is not expected to generate positive returns. However, Nebraska Municipal Fund is 5.86 times less risky than Scout Small. It waists most of its returns potential to compensate for thr risk taken. Scout Small is generating about 0.02 per unit of risk. If you would invest  2,750  in Scout Small Cap on October 23, 2024 and sell it today you would earn a total of  319.00  from holding Scout Small Cap or generate 11.6% return on investment over 90 days.

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

Nebraska Municipal Fund  vs.  Scout Small Cap

Nebraska Municipal

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nebraska Municipal Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Nebraska Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Scout Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Nebraska Municipal and Scout Small

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

The idea behind Nebraska Municipal Fund and Scout Small Cap 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.