Correlation Between California High-yield and Stet California
Can any of the company-specific risk be diversified away by investing in both California High-yield and Stet 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 California High-yield and Stet California 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 Stet California Municipal, you can compare the effects of market volatilities on California High-yield and Stet 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 California High-yield with a short position of Stet California. Check out your portfolio center. Please also check ongoing floating volatility patterns of California High-yield and Stet California.
Diversification Opportunities for California High-yield and Stet California
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between California and Stet is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding California High Yield Municipa and Stet California Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stet California 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 Stet California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stet California Municipal has no effect on the direction of California High-yield i.e., California High-yield and Stet California go up and down completely randomly.
Pair Corralation between California High-yield and Stet California
Assuming the 90 days horizon California High Yield Municipal is expected to generate 1.35 times more return on investment than Stet California. However, California High-yield is 1.35 times more volatile than Stet California Municipal. It trades about 0.18 of its potential returns per unit of risk. Stet California Municipal is currently generating about 0.18 per unit of risk. If you would invest 980.00 in California High Yield Municipal on August 29, 2024 and sell it today you would earn a total of 13.00 from holding California High Yield Municipal or generate 1.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
California High Yield Municipa vs. Stet California Municipal
Performance |
| Timeline |
| California High Yield |
| Stet California Municipal |
California High-yield and Stet California Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California High-yield and Stet California
The main advantage of trading using opposite California High-yield and Stet California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California High-yield position performs unexpectedly, Stet 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 Stet California will offset losses from the drop in Stet California'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 |
| Stet California vs. Copeland Risk Managed | Stet California vs. Morningstar Aggressive Growth | Stet California vs. Pace High Yield | Stet California vs. California High Yield Municipal |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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