Correlation Between Investec Emerging and Kentucky Tax

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

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

Diversification Opportunities for Investec Emerging and Kentucky Tax

0.21

Correlation Coefficient

Investec Emerging  Kentucky Tax

Modest diversification

The 3 months correlation between Investec and Kentucky is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Investec Emerging Markets and Kentucky Tax Free Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kentucky Tax Free and Investec Emerging 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 Investec Emerging Markets are associated (or correlated) with Kentucky Tax. 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 Investec Emerging i.e., Investec Emerging and Kentucky Tax go up and down completely randomly.

Pair Corralation between Investec Emerging and Kentucky Tax

Assuming the 90 days horizon Investec Emerging Markets is expected to generate 4.72 times more return on investment than Kentucky Tax. However, Investec Emerging is 4.72 times more volatile than Kentucky Tax Free Income. It trades about 0.07 of its potential returns per unit of risk. Kentucky Tax Free Income is currently generating about 0.02 per unit of risk. If you would invest  921.00  in Investec Emerging Markets on October 9, 2024 and sell it today you would earn a total of  153.00  from holding Investec Emerging Markets or generate 16.61% return on investment over 90 days.

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

Investec Emerging Markets  vs.  Kentucky Tax Free Income

Investec Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investec Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Investec Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kentucky Tax Free

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kentucky Tax Free Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Kentucky 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 Investec Emerging and Kentucky Tax

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

The idea behind Investec Emerging Markets and Kentucky 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.