Correlation Between Hawaiian Tax-free and Kansas Tax

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

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

Diversification Opportunities for Hawaiian Tax-free and Kansas Tax

0.99

Correlation Coefficient

Hawaiian Tax-free  Kansas Tax

No risk reduction

The 3 months correlation between Hawaiian and Kansas is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Hawaiian Tax Free Trust and The Kansas Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kansas Tax and Hawaiian Tax-free 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 Hawaiian Tax Free Trust are associated (or correlated) with Kansas Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kansas Tax has no effect on the direction of Hawaiian Tax-free i.e., Hawaiian Tax-free and Kansas Tax go up and down completely randomly.

Pair Corralation between Hawaiian Tax-free and Kansas Tax

Assuming the 90 days horizon Hawaiian Tax-free is expected to generate 1.71 times less return on investment than Kansas Tax. But when comparing it to its historical volatility, Hawaiian Tax Free Trust is 1.07 times less risky than Kansas Tax. It trades about 0.02 of its potential returns per unit of risk. The Kansas Tax Free is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,837  in The Kansas Tax Free on August 31, 2024 and sell it today you would earn a total of  6.00  from holding The Kansas Tax Free or generate 0.33% return on investment over 90 days.

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

Hawaiian Tax Free Trust  vs.  The Kansas Tax Free

Hawaiian Tax Free

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hawaiian Tax Free Trust are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Hawaiian Tax-free is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kansas Tax

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Kansas Tax Free are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Kansas 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 Hawaiian Tax-free and Kansas Tax

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

The idea behind Hawaiian Tax Free Trust and The Kansas 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.