Correlation Between Technology Ultrasector and High-yield Municipal

Can any of the company-specific risk be diversified away by investing in both Technology Ultrasector and High-yield Municipal 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 Technology Ultrasector and High-yield Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Technology Ultrasector Profund and High Yield Municipal Fund, you can compare the effects of market volatilities on Technology Ultrasector and High-yield Municipal 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 Technology Ultrasector with a short position of High-yield Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Technology Ultrasector and High-yield Municipal.

Diversification Opportunities for Technology Ultrasector and High-yield Municipal

0.64

Correlation Coefficient

Technology Ultrasector  High-yield Municipal

Poor diversification

The 3 months correlation between Technology and High-yield is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Technology Ultrasector Profund and High Yield Municipal Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Yield Municipal and Technology Ultrasector 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 Technology Ultrasector Profund are associated (or correlated) with High-yield Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Yield Municipal has no effect on the direction of Technology Ultrasector i.e., Technology Ultrasector and High-yield Municipal go up and down completely randomly.

Pair Corralation between Technology Ultrasector and High-yield Municipal

Assuming the 90 days horizon Technology Ultrasector Profund is expected to generate 7.03 times more return on investment than High-yield Municipal. However, Technology Ultrasector is 7.03 times more volatile than High Yield Municipal Fund. It trades about 0.18 of its potential returns per unit of risk. High Yield Municipal Fund is currently generating about -0.09 per unit of risk. If you would invest  13,561  in Technology Ultrasector Profund on March 4, 2024 and sell it today you would earn a total of  679.00  from holding Technology Ultrasector Profund or generate 5.01% return on investment over 90 days.

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

Technology Ultrasector Profund  vs.  High Yield Municipal Fund

Technology Ultrasector

Risk-Adjusted Performance

0 of 100

Very Weak

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

High Yield Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Technology Ultrasector and High-yield Municipal

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

The idea behind Technology Ultrasector Profund and High Yield Municipal 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 CEOs Directory module to screen CEOs from public companies around the world.