Correlation Between Oklahoma Municipal and Mid Cap

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

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

Diversification Opportunities for Oklahoma Municipal and Mid Cap

0.07

Correlation Coefficient

Oklahoma Municipal  Mid Cap

Significant diversification

The 3 months correlation between Oklahoma and Mid is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Oklahoma Municipal Fund and Mid Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Growth and Oklahoma 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 Oklahoma Municipal Fund are associated (or correlated) with Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Growth has no effect on the direction of Oklahoma Municipal i.e., Oklahoma Municipal and Mid Cap go up and down completely randomly.

Pair Corralation between Oklahoma Municipal and Mid Cap

Assuming the 90 days horizon Oklahoma Municipal Fund is expected to generate 0.14 times more return on investment than Mid Cap. However, Oklahoma Municipal Fund is 7.03 times less risky than Mid Cap. It trades about -0.31 of its potential returns per unit of risk. Mid Cap Growth is currently generating about -0.11 per unit of risk. If you would invest  1,068  in Oklahoma Municipal Fund on October 10, 2024 and sell it today you would lose (19.00) from holding Oklahoma Municipal Fund or give up 1.78% of portfolio value over 90 days.

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

Oklahoma Municipal Fund  vs.  Mid Cap Growth

Oklahoma Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Mid Cap Growth

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Growth are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Mid Cap showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oklahoma Municipal and Mid Cap

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

The idea behind Oklahoma Municipal Fund and Mid Cap Growth 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.