Correlation Between California High-yield and Nebraska Municipal
Can any of the company-specific risk be diversified away by investing in both California High-yield and Nebraska 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 California High-yield and Nebraska Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between California High Yield Municipal and Nebraska Municipal Fund, you can compare the effects of market volatilities on California High-yield and Nebraska 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 California High-yield with a short position of Nebraska Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of California High-yield and Nebraska Municipal.
Diversification Opportunities for California High-yield and Nebraska Municipal
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between California and NEBRASKA is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding California High Yield Municipa and Nebraska Municipal Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nebraska Municipal and California High-yield 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 California High Yield Municipal are associated (or correlated) with Nebraska Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nebraska Municipal has no effect on the direction of California High-yield i.e., California High-yield and Nebraska Municipal go up and down completely randomly.
Pair Corralation between California High-yield and Nebraska Municipal
Assuming the 90 days horizon California High-yield is expected to generate 1.34 times less return on investment than Nebraska Municipal. But when comparing it to its historical volatility, California High Yield Municipal is 1.17 times less risky than Nebraska Municipal. It trades about 0.15 of its potential returns per unit of risk. Nebraska Municipal Fund is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 926.00 in Nebraska Municipal Fund on August 29, 2024 and sell it today you would earn a total of 14.00 from holding Nebraska Municipal Fund or generate 1.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
California High Yield Municipa vs. Nebraska Municipal Fund
Performance |
| Timeline |
| California High Yield |
| Nebraska Municipal |
California High-yield and Nebraska Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California High-yield and Nebraska Municipal
The main advantage of trading using opposite California High-yield and Nebraska Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California High-yield position performs unexpectedly, Nebraska 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 Nebraska Municipal will offset losses from the drop in Nebraska Municipal's long position.| California High-yield vs. Davis Financial Fund | California High-yield vs. Icon Financial Fund | California High-yield vs. Financial Industries Fund | California High-yield vs. Transamerica Financial Life |
| Nebraska Municipal vs. Colorado Bondshares A | Nebraska Municipal vs. Virginia Bond Fund | Nebraska Municipal vs. HUMANA INC | Nebraska Municipal vs. Aquagold International |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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