Correlation Between American High-income and Gurtin California
Can any of the company-specific risk be diversified away by investing in both American High-income and Gurtin California 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 American High-income and Gurtin California into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American High Income Municipal and Gurtin California Muni, you can compare the effects of market volatilities on American High-income and Gurtin California 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 American High-income with a short position of Gurtin California. Check out your portfolio center. Please also check ongoing floating volatility patterns of American High-income and Gurtin California.
Diversification Opportunities for American High-income and Gurtin California
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between American and Gurtin is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding American High Income Municipal and Gurtin California Muni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gurtin California Muni and American High-income 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 American High Income Municipal are associated (or correlated) with Gurtin California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gurtin California Muni has no effect on the direction of American High-income i.e., American High-income and Gurtin California go up and down completely randomly.
Pair Corralation between American High-income and Gurtin California
Assuming the 90 days horizon American High Income Municipal is expected to generate 2.33 times more return on investment than Gurtin California. However, American High-income is 2.33 times more volatile than Gurtin California Muni. It trades about 0.03 of its potential returns per unit of risk. Gurtin California Muni is currently generating about 0.05 per unit of risk. If you would invest 1,530 in American High Income Municipal on November 2, 2024 and sell it today you would earn a total of 2.00 from holding American High Income Municipal or generate 0.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American High Income Municipal vs. Gurtin California Muni
Performance |
| Timeline |
| American High Income |
| Gurtin California Muni |
American High-income and Gurtin California Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American High-income and Gurtin California
The main advantage of trading using opposite American High-income and Gurtin California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American High-income position performs unexpectedly, Gurtin California 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 Gurtin California will offset losses from the drop in Gurtin California's long position.| American High-income vs. Virtus Convertible | American High-income vs. Putnam Convertible Securities | American High-income vs. Fidelity Sai Convertible | American High-income vs. Allianzgi Convertible Income |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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