Correlation Between Ab Bond and California Municipal
Can any of the company-specific risk be diversified away by investing in both Ab Bond and California Municipal 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 Ab Bond and California Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ab Bond Inflation and California Municipal Portfolio, you can compare the effects of market volatilities on Ab Bond and California Municipal 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 Ab Bond with a short position of California Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Bond and California Municipal.
Diversification Opportunities for Ab Bond and California Municipal
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ABNCX and California is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Ab Bond Inflation and California Municipal Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Municipal and Ab Bond 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 Ab Bond Inflation are associated (or correlated) with California Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Municipal has no effect on the direction of Ab Bond i.e., Ab Bond and California Municipal go up and down completely randomly.
Pair Corralation between Ab Bond and California Municipal
Assuming the 90 days horizon Ab Bond Inflation is expected to generate 0.98 times more return on investment than California Municipal. However, Ab Bond Inflation is 1.02 times less risky than California Municipal. It trades about -0.06 of its potential returns per unit of risk. California Municipal Portfolio is currently generating about -0.1 per unit of risk. If you would invest 996.00 in Ab Bond Inflation on October 16, 2024 and sell it today you would lose (4.00) from holding Ab Bond Inflation or give up 0.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.44% |
| Values | Daily Returns |
Ab Bond Inflation vs. California Municipal Portfolio
Performance |
| Timeline |
| Ab Bond Inflation |
| California Municipal |
Ab Bond and California Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ab Bond and California Municipal
The main advantage of trading using opposite Ab Bond and California Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Bond position performs unexpectedly, California Municipal 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 California Municipal will offset losses from the drop in California Municipal's long position.| Ab Bond vs. Angel Oak Multi Strategy | Ab Bond vs. Nasdaq 100 2x Strategy | Ab Bond vs. Western Assets Emerging | Ab Bond vs. Inverse Nasdaq 100 Strategy |
| California Municipal vs. Ab Bond Inflation | California Municipal vs. Ab Bond Inflation | California Municipal vs. Ab Bond Inflation | California Municipal vs. Tiaa Cref Inflation Linked Bond |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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