Correlation Between Tax Free and Jensen Quality
Can any of the company-specific risk be diversified away by investing in both Tax Free and Jensen Quality 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 Tax Free and Jensen Quality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tax Free Conservative Income and Jensen Quality Value, you can compare the effects of market volatilities on Tax Free and Jensen Quality 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 Tax Free with a short position of Jensen Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tax Free and Jensen Quality.
Diversification Opportunities for Tax Free and Jensen Quality
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Tax and Jensen is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Tax Free Conservative Income and Jensen Quality Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jensen Quality Value and 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 Tax Free Conservative Income are associated (or correlated) with Jensen Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jensen Quality Value has no effect on the direction of Tax Free i.e., Tax Free and Jensen Quality go up and down completely randomly.
Pair Corralation between Tax Free and Jensen Quality
Assuming the 90 days horizon Tax Free is expected to generate 14.84 times less return on investment than Jensen Quality. But when comparing it to its historical volatility, Tax Free Conservative Income is 44.27 times less risky than Jensen Quality. It trades about 0.21 of its potential returns per unit of risk. Jensen Quality Value is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,555 in Jensen Quality Value on September 12, 2025 and sell it today you would earn a total of 109.00 from holding Jensen Quality Value or generate 7.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.44% |
| Values | Daily Returns |
Tax Free Conservative Income vs. Jensen Quality Value
Performance |
| Timeline |
| Tax Free Conservative |
| Jensen Quality Value |
Tax Free and Jensen Quality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tax Free and Jensen Quality
The main advantage of trading using opposite Tax Free and Jensen Quality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tax Free position performs unexpectedly, Jensen Quality 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 Jensen Quality will offset losses from the drop in Jensen Quality's long position.| Tax Free vs. Gmo High Yield | Tax Free vs. Flexible Bond Portfolio | Tax Free vs. Guidemark E Fixed | Tax Free vs. Ishares Aggregate Bond |
| Jensen Quality vs. Mainstay Epoch Capital | Jensen Quality vs. Amana Developing World | Jensen Quality vs. Amana Developing World | Jensen Quality vs. Small Pany Fund |
Check out your portfolio center.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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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