Correlation Between Georgia Tax-free and Ep Emerging

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

By analyzing existing cross correlation between Georgia Tax Free Bond and Ep Emerging Markets, you can compare the effects of market volatilities on Georgia Tax-free and Ep Emerging 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 Georgia Tax-free with a short position of Ep Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Georgia Tax-free and Ep Emerging.

Diversification Opportunities for Georgia Tax-free and Ep Emerging

0.45

Correlation Coefficient

Georgia Tax-free  Ep Emerging

Very weak diversification

The 3 months correlation between Georgia and EPEIX is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Georgia Tax Free Bond and Ep Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ep Emerging Markets and Georgia Tax-free 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 Georgia Tax Free Bond are associated (or correlated) with Ep Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ep Emerging Markets has no effect on the direction of Georgia Tax-free i.e., Georgia Tax-free and Ep Emerging go up and down completely randomly.

Pair Corralation between Georgia Tax-free and Ep Emerging

Assuming the 90 days horizon Georgia Tax-free is expected to generate 6.82 times less return on investment than Ep Emerging. But when comparing it to its historical volatility, Georgia Tax Free Bond is 3.0 times less risky than Ep Emerging. It trades about 0.04 of its potential returns per unit of risk. Ep Emerging Markets is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  994.00  in Ep Emerging Markets on December 21, 2024 and sell it today you would earn a total of  38.00  from holding Ep Emerging Markets or generate 3.82% return on investment over 90 days.

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

Georgia Tax Free Bond  vs.  Ep Emerging Markets

Georgia Tax Free

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Georgia Tax Free Bond are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Georgia Tax-free is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ep Emerging Markets

Risk-Adjusted Performance

OK

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

Pair Trading with Georgia Tax-free and Ep Emerging

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

The idea behind Georgia Tax Free Bond and Ep Emerging Markets 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.