Correlation Between Oklahoma Municipal and New Economy

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

By analyzing existing cross correlation between Oklahoma Municipal Fund and New Economy Fund, you can compare the effects of market volatilities on Oklahoma Municipal and New Economy 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 Oklahoma Municipal with a short position of New Economy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oklahoma Municipal and New Economy.

Diversification Opportunities for Oklahoma Municipal and New Economy

-0.43

Correlation Coefficient

Oklahoma Municipal  New Economy

Very good diversification

The 3 months correlation between Oklahoma and New is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Oklahoma Municipal Fund and New Economy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Economy Fund and Oklahoma 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 Oklahoma Municipal Fund are associated (or correlated) with New Economy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Economy Fund has no effect on the direction of Oklahoma Municipal i.e., Oklahoma Municipal and New Economy go up and down completely randomly.

Pair Corralation between Oklahoma Municipal and New Economy

Assuming the 90 days horizon Oklahoma Municipal is expected to generate 13.71 times less return on investment than New Economy. But when comparing it to its historical volatility, Oklahoma Municipal Fund is 3.08 times less risky than New Economy. It trades about 0.03 of its potential returns per unit of risk. New Economy Fund is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  6,174  in New Economy Fund on September 3, 2024 and sell it today you would earn a total of  503.00  from holding New Economy Fund or generate 8.15% return on investment over 90 days.

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

Oklahoma Municipal Fund  vs.  New Economy Fund

Oklahoma Municipal

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Oklahoma Municipal Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Oklahoma Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

New Economy Fund

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in New Economy Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, New Economy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Oklahoma Municipal and New Economy

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

The idea behind Oklahoma Municipal Fund and New Economy 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.