Correlation Between Value Fund and Tax-free Conservative

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

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

Diversification Opportunities for Value Fund and Tax-free Conservative

0.9

Correlation Coefficient

Value Fund  Tax-free Conservative

Almost no diversification

The 3 months correlation between Value and Tax-free is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Value Fund I and Tax Free Conservative Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Free Conservative and Value Fund 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 Value Fund I are associated (or correlated) with Tax-free Conservative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Free Conservative has no effect on the direction of Value Fund i.e., Value Fund and Tax-free Conservative go up and down completely randomly.

Pair Corralation between Value Fund and Tax-free Conservative

Assuming the 90 days horizon Value Fund I is expected to generate 14.45 times more return on investment than Tax-free Conservative. However, Value Fund is 14.45 times more volatile than Tax Free Conservative Income. It trades about 0.22 of its potential returns per unit of risk. Tax Free Conservative Income is currently generating about 0.25 per unit of risk. If you would invest  780.00  in Value Fund I on May 28, 2025 and sell it today you would earn a total of  70.00  from holding Value Fund I or generate 8.97% return on investment over 90 days.

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

Value Fund I  vs.  Tax Free Conservative Income

Value Fund I

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Value Fund I are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Value Fund may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Tax Free Conservative

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tax Free Conservative Income are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Tax-free Conservative is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Value Fund and Tax-free Conservative

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

The idea behind Value Fund I and Tax Free Conservative Income 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.