Correlation Between Empiric 2500 and National Tax

Can any of the company-specific risk be diversified away by investing in both Empiric 2500 and National 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 Empiric 2500 and National Tax into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Empiric 2500 Fund and The National Tax Free, you can compare the effects of market volatilities on Empiric 2500 and National 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 Empiric 2500 with a short position of National Tax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empiric 2500 and National Tax.

Diversification Opportunities for Empiric 2500 and National Tax

0.08

Correlation Coefficient

Empiric 2500  National Tax

Significant diversification

The 3 months correlation between Empiric and National is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Empiric 2500 Fund and The National Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Tax and Empiric 2500 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 Empiric 2500 Fund are associated (or correlated) with National Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Tax has no effect on the direction of Empiric 2500 i.e., Empiric 2500 and National Tax go up and down completely randomly.

Pair Corralation between Empiric 2500 and National Tax

Assuming the 90 days horizon Empiric 2500 Fund is expected to generate 4.63 times more return on investment than National Tax. However, Empiric 2500 is 4.63 times more volatile than The National Tax Free. It trades about 0.13 of its potential returns per unit of risk. The National Tax Free is currently generating about -0.04 per unit of risk. If you would invest  5,457  in Empiric 2500 Fund on September 16, 2024 and sell it today you would earn a total of  423.00  from holding Empiric 2500 Fund or generate 7.75% return on investment over 90 days.

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

Empiric 2500 Fund  vs.  The National Tax Free

Empiric 2500

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Empiric 2500 Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Empiric 2500 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

National Tax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The National Tax Free has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, National 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 Empiric 2500 and National Tax

The main advantage of trading using opposite Empiric 2500 and National Tax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empiric 2500 position performs unexpectedly, National 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 National Tax will offset losses from the drop in National Tax's long position.

The idea behind Empiric 2500 Fund and The National Tax Free 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.