Correlation Between Us Government and Aquila Tax

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

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

Diversification Opportunities for Us Government and Aquila Tax

0.55

Correlation Coefficient

Us Government  Aquila Tax

Very weak diversification

The 3 months correlation between GVPIX and Aquila is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Plus 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 Us Government 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 Us Government Plus are associated (or correlated) with Aquila Tax. 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 Us Government i.e., Us Government and Aquila Tax go up and down completely randomly.

Pair Corralation between Us Government and Aquila Tax

Assuming the 90 days horizon Us Government Plus is expected to under-perform the Aquila Tax. In addition to that, Us Government is 5.46 times more volatile than Aquila Tax Free Fund. It trades about -0.12 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  979.00  in Aquila Tax Free Fund on September 12, 2024 and sell it today you would earn a total of  5.00  from holding Aquila Tax Free Fund or generate 0.51% return on investment over 90 days.

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

Us Government Plus  vs.  Aquila Tax Free Fund

Us Government Plus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Us Government Plus has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Aquila Tax Free

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aquila Tax Free Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Aquila 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 Us Government and Aquila Tax

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

The idea behind Us Government Plus 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.