Correlation Between Short Duration and Nebraska Tax

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

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

Diversification Opportunities for Short Duration and Nebraska Tax

0.59

Correlation Coefficient

Short Duration  Nebraska Tax

Very weak diversification

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

Pair Corralation between Short Duration and Nebraska Tax

Assuming the 90 days horizon Short Duration Income is expected to generate 0.78 times more return on investment than Nebraska Tax. However, Short Duration Income is 1.28 times less risky than Nebraska Tax. It trades about 0.16 of its potential returns per unit of risk. Nebraska Tax Free Income is currently generating about 0.05 per unit of risk. If you would invest  1,187  in Short Duration Income on December 1, 2024 and sell it today you would earn a total of  12.00  from holding Short Duration Income or generate 1.01% return on investment over 90 days.

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

Short Duration Income  vs.  Nebraska Tax Free Income

Short Duration Income

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Short Duration Income are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Short Duration is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nebraska Tax Free

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Short Duration and Nebraska Tax

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

The idea behind Short Duration Income and Nebraska Tax Free 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.