Correlation Between High-yield Municipal and T Rex

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

By analyzing existing cross correlation between High Yield Municipal Fund and T Rex 2X Inverse, you can compare the effects of market volatilities on High-yield Municipal and T Rex 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 High-yield Municipal with a short position of T Rex. Check out your portfolio center. Please also check ongoing floating volatility patterns of High-yield Municipal and T Rex.

Diversification Opportunities for High-yield Municipal and T Rex

-0.61

Correlation Coefficient

High-yield Municipal  T Rex

Excellent diversification

The 3 months correlation between High-yield and ETQ is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund and T Rex 2X Inverse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Rex 2X and High-yield Municipal 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 High Yield Municipal Fund are associated (or correlated) with T Rex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Rex 2X has no effect on the direction of High-yield Municipal i.e., High-yield Municipal and T Rex go up and down completely randomly.

Pair Corralation between High-yield Municipal and T Rex

Assuming the 90 days horizon High Yield Municipal Fund is expected to generate 0.04 times more return on investment than T Rex. However, High Yield Municipal Fund is 27.28 times less risky than T Rex. It trades about 0.13 of its potential returns per unit of risk. T Rex 2X Inverse is currently generating about -0.39 per unit of risk. If you would invest  894.00  in High Yield Municipal Fund on September 4, 2024 and sell it today you would earn a total of  9.00  from holding High Yield Municipal Fund or generate 1.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

High Yield Municipal Fund  vs.  T Rex 2X Inverse

High Yield Municipal

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in High Yield Municipal Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. 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.

T Rex 2X

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days T Rex 2X Inverse has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Etf's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

Pair Trading with High-yield Municipal and T Rex

The main advantage of trading using opposite High-yield Municipal and T Rex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High-yield Municipal position performs unexpectedly, T Rex 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 T Rex will offset losses from the drop in T Rex's long position.

The idea behind High Yield Municipal Fund and T Rex 2X Inverse 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.