Correlation Between Municipal Bond and Global E

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Can any of the company-specific risk be diversified away by investing in both Municipal Bond and Global E 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 Municipal Bond and Global E into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Municipal Bond Fund and Global E Portfolio, you can compare the effects of market volatilities on Municipal Bond and Global E 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 Municipal Bond with a short position of Global E. Check out your portfolio center. Please also check ongoing floating volatility patterns of Municipal Bond and Global E.

Diversification Opportunities for Municipal Bond and Global E

0.07
  Correlation Coefficient

Significant diversification

The 3 months correlation between Municipal and Global is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Municipal Bond Fund and Global E Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global E Portfolio and Municipal 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 Municipal Bond Fund are associated (or correlated) with Global E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global E Portfolio has no effect on the direction of Municipal Bond i.e., Municipal Bond and Global E go up and down completely randomly.

Pair Corralation between Municipal Bond and Global E

Assuming the 90 days horizon Municipal Bond Fund is expected to under-perform the Global E. But the mutual fund apears to be less risky and, when comparing its historical volatility, Municipal Bond Fund is 2.93 times less risky than Global E. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Global E Portfolio is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,090  in Global E Portfolio on September 26, 2024 and sell it today you would earn a total of  32.00  from holding Global E Portfolio or generate 1.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy97.62%
ValuesDaily Returns

Municipal Bond Fund  vs.  Global E Portfolio

 Performance 
       Timeline  
Municipal Bond 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Municipal Bond Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Municipal Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Global E Portfolio 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Global E Portfolio are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Global E is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Municipal Bond and Global E Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Municipal Bond and Global E

The main advantage of trading using opposite Municipal Bond and Global E positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Municipal Bond position performs unexpectedly, Global E 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 Global E will offset losses from the drop in Global E's long position.
The idea behind Municipal Bond Fund and Global E Portfolio 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.

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