Correlation Between New York and Ab Minnesota

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

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

Diversification Opportunities for New York and Ab Minnesota

0.89

Correlation Coefficient

New York  Ab Minnesota

Very poor diversification

The 3 months correlation between New and AMNAX is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding New York Municipal and Ab Minnesota Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Minnesota Portfolio and New York 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 New York Municipal are associated (or correlated) with Ab Minnesota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Minnesota Portfolio has no effect on the direction of New York i.e., New York and Ab Minnesota go up and down completely randomly.

Pair Corralation between New York and Ab Minnesota

Assuming the 90 days horizon New York Municipal is expected to generate 0.73 times more return on investment than Ab Minnesota. However, New York Municipal is 1.38 times less risky than Ab Minnesota. It trades about -0.04 of its potential returns per unit of risk. Ab Minnesota Portfolio is currently generating about -0.06 per unit of risk. If you would invest  1,356  in New York Municipal on August 28, 2024 and sell it today you would lose (4.00) from holding New York Municipal or give up 0.29% of portfolio value over 90 days.

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

New York Municipal  vs.  Ab Minnesota Portfolio

New York Municipal

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New York Municipal are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, New York is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ab Minnesota Portfolio

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with New York and Ab Minnesota

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

The idea behind New York Municipal and Ab Minnesota Portfolio 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.