Correlation Between Oklahoma Municipal and Northern Short-intermedia

Can any of the company-specific risk be diversified away by investing in both Oklahoma Municipal and Northern Short-intermedia 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 Northern Short-intermedia 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 Northern Short Intermediate Tax Exempt, you can compare the effects of market volatilities on Oklahoma Municipal and Northern Short-intermedia 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 Northern Short-intermedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oklahoma Municipal and Northern Short-intermedia.

Diversification Opportunities for Oklahoma Municipal and Northern Short-intermedia

0.77

Correlation Coefficient

Oklahoma Municipal  Northern Short-intermedia

Poor diversification

The 3 months correlation between Oklahoma and Northern is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Oklahoma Municipal Fund and Northern Short Intermediate Ta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Short-intermedia 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 Northern Short-intermedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Short-intermedia has no effect on the direction of Oklahoma Municipal i.e., Oklahoma Municipal and Northern Short-intermedia go up and down completely randomly.

Pair Corralation between Oklahoma Municipal and Northern Short-intermedia

Assuming the 90 days horizon Oklahoma Municipal is expected to generate 2.52 times less return on investment than Northern Short-intermedia. In addition to that, Oklahoma Municipal is 2.49 times more volatile than Northern Short Intermediate Tax Exempt. It trades about 0.03 of its total potential returns per unit of risk. Northern Short Intermediate Tax Exempt is currently generating about 0.17 per unit of volatility. If you would invest  985.00  in Northern Short Intermediate Tax Exempt on December 22, 2024 and sell it today you would earn a total of  10.00  from holding Northern Short Intermediate Tax Exempt or generate 1.02% return on investment over 90 days.

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

Oklahoma Municipal Fund  vs.  Northern Short Intermediate Ta

Oklahoma Municipal

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Oklahoma Municipal Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. 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.

Northern Short-intermedia

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Short Intermediate Tax Exempt are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Northern Short-intermedia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Oklahoma Municipal and Northern Short-intermedia

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

The idea behind Oklahoma Municipal Fund and Northern Short Intermediate Tax Exempt 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.