Correlation Between Absolute Convertible and California Bond
Can any of the company-specific risk be diversified away by investing in both Absolute Convertible and California Bond 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 Absolute Convertible and California Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Absolute Convertible Arbitrage and California Bond Fund, you can compare the effects of market volatilities on Absolute Convertible and California Bond 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 Absolute Convertible with a short position of California Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Convertible and California Bond.
Diversification Opportunities for Absolute Convertible and California Bond
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Absolute and California is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Convertible Arbitrage and California Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Bond and Absolute Convertible 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 Absolute Convertible Arbitrage are associated (or correlated) with California Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Bond has no effect on the direction of Absolute Convertible i.e., Absolute Convertible and California Bond go up and down completely randomly.
Pair Corralation between Absolute Convertible and California Bond
Assuming the 90 days horizon Absolute Convertible Arbitrage is expected to generate 0.18 times more return on investment than California Bond. However, Absolute Convertible Arbitrage is 5.62 times less risky than California Bond. It trades about 0.59 of its potential returns per unit of risk. California Bond Fund is currently generating about 0.06 per unit of risk. If you would invest 1,129 in Absolute Convertible Arbitrage on August 31, 2024 and sell it today you would earn a total of 21.00 from holding Absolute Convertible Arbitrage or generate 1.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Absolute Convertible Arbitrage vs. California Bond Fund
Performance |
| Timeline |
| Absolute Convertible |
| California Bond |
Absolute Convertible and California Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Absolute Convertible and California Bond
The main advantage of trading using opposite Absolute Convertible and California Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Convertible position performs unexpectedly, California Bond 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 Bond will offset losses from the drop in California Bond's long position.| Absolute Convertible vs. Calamos Market Neutral | Absolute Convertible vs. Calamos Market Neutral | Absolute Convertible vs. Aqr Diversified Arbitrage | Absolute Convertible vs. Aqr Diversified Arbitrage |
| California Bond vs. Aqr Risk Balanced Modities | California Bond vs. California High Yield Municipal | California Bond vs. Ab High Income | California Bond vs. Pace High Yield |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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