Correlation Between Kentucky Tax-free and Aquila Tax-free

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

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

Diversification Opportunities for Kentucky Tax-free and Aquila Tax-free

0.78

Correlation Coefficient

Kentucky Tax-free  Aquila Tax-free

Poor diversification

The 3 months correlation between Kentucky and AQUILA is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Kentucky Tax Free Income and Aquila Tax Free Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aquila Tax Free and Kentucky 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 Kentucky Tax Free Income are associated (or correlated) with Aquila Tax-free. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aquila Tax Free has no effect on the direction of Kentucky Tax-free i.e., Kentucky Tax-free and Aquila Tax-free go up and down completely randomly.

Pair Corralation between Kentucky Tax-free and Aquila Tax-free

Assuming the 90 days horizon Kentucky Tax Free Income is expected to under-perform the Aquila Tax-free. In addition to that, Kentucky Tax-free is 1.14 times more volatile than Aquila Tax Free Fund. It trades about -0.1 of its total potential returns per unit of risk. Aquila Tax Free Fund is currently generating about -0.04 per unit of volatility. If you would invest  975.00  in Aquila Tax Free Fund on February 6, 2024 and sell it today you would lose (1.00) from holding Aquila Tax Free Fund or give up 0.1% of portfolio value over 90 days.

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

Kentucky Tax Free Income  vs.  Aquila Tax Free Fund

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-free is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aquila Tax Free

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aquila Tax Free Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic 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.

Pair Trading with Kentucky Tax-free and Aquila Tax-free

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

The idea behind Kentucky Tax Free Income and Aquila Tax Free Fund 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.