Correlation Between Aquila Tax-free and The Fixed

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

By analyzing existing cross correlation between Aquila Tax Free Fund and The Fixed Income, you can compare the effects of market volatilities on Aquila Tax-free and The Fixed 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 Aquila Tax-free with a short position of The Fixed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aquila Tax-free and The Fixed.

Diversification Opportunities for Aquila Tax-free and The Fixed

0.75

Correlation Coefficient

Aquila Tax-free  The Fixed

Poor diversification

The 3 months correlation between Aquila and The is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Aquila Tax Free Fund and The Fixed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fixed Income and Aquila 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 Aquila Tax Free Fund are associated (or correlated) with The Fixed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fixed Income has no effect on the direction of Aquila Tax-free i.e., Aquila Tax-free and The Fixed go up and down completely randomly.

Pair Corralation between Aquila Tax-free and The Fixed

Assuming the 90 days horizon Aquila Tax-free is expected to generate 1.31 times less return on investment than The Fixed. But when comparing it to its historical volatility, Aquila Tax Free Fund is 2.11 times less risky than The Fixed. It trades about 0.54 of its potential returns per unit of risk. The Fixed Income is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  736.00  in The Fixed Income on September 9, 2024 and sell it today you would earn a total of  10.00  from holding The Fixed Income or generate 1.36% return on investment over 90 days.

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

Aquila Tax Free Fund  vs.  The Fixed Income

Aquila Tax Free

Risk-Adjusted Performance

4 of 100

Insignificant

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

Fixed Income

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Fixed Income are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, The Fixed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aquila Tax-free and The Fixed

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

The idea behind Aquila Tax Free Fund and The Fixed 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.