Correlation Between High-yield Municipal and Origin Materials

Can any of the company-specific risk be diversified away by investing in both High-yield Municipal and Origin Materials 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 Origin Materials 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 Origin Materials Warrant, you can compare the effects of market volatilities on High-yield Municipal and Origin Materials 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 Origin Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of High-yield Municipal and Origin Materials.

Diversification Opportunities for High-yield Municipal and Origin Materials

0.49

Correlation Coefficient

High-yield Municipal  Origin Materials

Very weak diversification

The 3 months correlation between High-yield and Origin is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund and Origin Materials Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Materials Warrant 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 Origin Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Origin Materials Warrant has no effect on the direction of High-yield Municipal i.e., High-yield Municipal and Origin Materials go up and down completely randomly.

Pair Corralation between High-yield Municipal and Origin Materials

Assuming the 90 days horizon High-yield Municipal is expected to generate 46.17 times less return on investment than Origin Materials. But when comparing it to its historical volatility, High Yield Municipal Fund is 41.09 times less risky than Origin Materials. It trades about 0.08 of its potential returns per unit of risk. Origin Materials Warrant is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  9.50  in Origin Materials Warrant on September 3, 2024 and sell it today you would earn a total of  2.50  from holding Origin Materials Warrant or generate 26.32% return on investment over 90 days.

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

High Yield Municipal Fund  vs.  Origin Materials Warrant

High Yield Municipal

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in High Yield Municipal Fund are ranked lower than 6 (%) 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.

Origin Materials Warrant

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Origin Materials Warrant are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Origin Materials showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with High-yield Municipal and Origin Materials

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

The idea behind High Yield Municipal Fund and Origin Materials Warrant 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.