Correlation Between Tax-exempt Bond and Aam/insight Select

Can any of the company-specific risk be diversified away by investing in both Tax-exempt Bond and Aam/insight Select 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 Tax-exempt Bond and Aam/insight Select into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tax Exempt Bond Fund and Aaminsight Select Income, you can compare the effects of market volatilities on Tax-exempt Bond and Aam/insight Select 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 Tax-exempt Bond with a short position of Aam/insight Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tax-exempt Bond and Aam/insight Select.

Diversification Opportunities for Tax-exempt Bond and Aam/insight Select

0.67

Correlation Coefficient

Tax-exempt Bond  Aam/insight Select

Poor diversification

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

Pair Corralation between Tax-exempt Bond and Aam/insight Select

Assuming the 90 days horizon Tax Exempt Bond Fund is expected to generate 0.58 times more return on investment than Aam/insight Select. However, Tax Exempt Bond Fund is 1.74 times less risky than Aam/insight Select. It trades about 0.08 of its potential returns per unit of risk. Aaminsight Select Income is currently generating about -0.04 per unit of risk. If you would invest  2,199  in Tax Exempt Bond Fund on September 5, 2024 and sell it today you would earn a total of  20.00  from holding Tax Exempt Bond Fund or generate 0.91% return on investment over 90 days.

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

Tax Exempt Bond Fund  vs.  Aaminsight Select Income

Tax Exempt Bond

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tax Exempt Bond Fund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Tax-exempt Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aaminsight Select Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Tax-exempt Bond and Aam/insight Select

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

The idea behind Tax Exempt Bond Fund and Aaminsight Select Income 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.