Correlation Between Tax-managed and Kentucky Tax-free

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

By analyzing existing cross correlation between Tax Managed Mid Small and Kentucky Tax Free Short To Medium, you can compare the effects of market volatilities on Tax-managed and Kentucky Tax-free 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-managed with a short position of Kentucky Tax-free. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tax-managed and Kentucky Tax-free.

Diversification Opportunities for Tax-managed and Kentucky Tax-free

-0.59

Correlation Coefficient

Tax-managed  Kentucky Tax-free

Excellent diversification

The 3 months correlation between Tax-managed and Kentucky is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Tax Managed Mid Small and Kentucky Tax Free Short To Med in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kentucky Tax Free and Tax-managed 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 Managed Mid Small are associated (or correlated) with Kentucky Tax-free. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kentucky Tax Free has no effect on the direction of Tax-managed i.e., Tax-managed and Kentucky Tax-free go up and down completely randomly.

Pair Corralation between Tax-managed and Kentucky Tax-free

Assuming the 90 days horizon Tax Managed Mid Small is expected to under-perform the Kentucky Tax-free. In addition to that, Tax-managed is 10.94 times more volatile than Kentucky Tax Free Short To Medium. It trades about -0.12 of its total potential returns per unit of risk. Kentucky Tax Free Short To Medium is currently generating about 0.17 per unit of volatility. If you would invest  509.00  in Kentucky Tax Free Short To Medium on December 21, 2024 and sell it today you would earn a total of  5.00  from holding Kentucky Tax Free Short To Medium or generate 0.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Tax Managed Mid Small  vs.  Kentucky Tax Free Short To Med

Tax Managed Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tax Managed Mid Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Kentucky Tax Free

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kentucky Tax Free Short To Medium are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Kentucky Tax-free 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-managed and Kentucky Tax-free

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

The idea behind Tax Managed Mid Small and Kentucky Tax Free Short To Medium 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 Stocks Directory module to find actively traded stocks across global markets.