Correlation Between College Retirement and Tax-exempt Fund

Can any of the company-specific risk be diversified away by investing in both College Retirement and Tax-exempt Fund 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 College Retirement and Tax-exempt Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between College Retirement Equities and Tax Exempt Fund Of, you can compare the effects of market volatilities on College Retirement and Tax-exempt Fund 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 College Retirement with a short position of Tax-exempt Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of College Retirement and Tax-exempt Fund.

Diversification Opportunities for College Retirement and Tax-exempt Fund

0.61

Correlation Coefficient

College Retirement  Tax-exempt Fund

Poor diversification

The 3 months correlation between College and Tax-exempt is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding College Retirement Equities and Tax Exempt Fund Of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Exempt Fund and College Retirement 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 College Retirement Equities are associated (or correlated) with Tax-exempt Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Exempt Fund has no effect on the direction of College Retirement i.e., College Retirement and Tax-exempt Fund go up and down completely randomly.

Pair Corralation between College Retirement and Tax-exempt Fund

Assuming the 90 days trading horizon College Retirement Equities is expected to generate 3.37 times more return on investment than Tax-exempt Fund. However, College Retirement is 3.37 times more volatile than Tax Exempt Fund Of. It trades about 0.09 of its potential returns per unit of risk. Tax Exempt Fund Of is currently generating about 0.05 per unit of risk. If you would invest  25,000  in College Retirement Equities on October 25, 2024 and sell it today you would earn a total of  10,216  from holding College Retirement Equities or generate 40.86% return on investment over 90 days.

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

College Retirement Equities  vs.  Tax Exempt Fund Of

College Retirement

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in College Retirement Equities are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, College Retirement is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Tax Exempt Fund

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with College Retirement and Tax-exempt Fund

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

The idea behind College Retirement Equities and Tax Exempt Fund Of 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.