Correlation Between California High-yield and Vanguard 500
Can any of the company-specific risk be diversified away by investing in both California High-yield and Vanguard 500 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 Vanguard 500 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 Vanguard 500 Index, you can compare the effects of market volatilities on California High-yield and Vanguard 500 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 Vanguard 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of California High-yield and Vanguard 500.
Diversification Opportunities for California High-yield and Vanguard 500
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between California and Vanguard is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding California High Yield Municipa and Vanguard 500 Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard 500 Index 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 Vanguard 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard 500 Index has no effect on the direction of California High-yield i.e., California High-yield and Vanguard 500 go up and down completely randomly.
Pair Corralation between California High-yield and Vanguard 500
Assuming the 90 days horizon California High-yield is expected to generate 4.42 times less return on investment than Vanguard 500. But when comparing it to its historical volatility, California High Yield Municipal is 2.9 times less risky than Vanguard 500. It trades about 0.07 of its potential returns per unit of risk. Vanguard 500 Index is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 19,129 in Vanguard 500 Index on September 3, 2024 and sell it today you would earn a total of 10,443 from holding Vanguard 500 Index or generate 54.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
California High Yield Municipa vs. Vanguard 500 Index
Performance |
| Timeline |
| California High Yield |
| Vanguard 500 Index |
California High-yield and Vanguard 500 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California High-yield and Vanguard 500
The main advantage of trading using opposite California High-yield and Vanguard 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California High-yield position performs unexpectedly, Vanguard 500 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 Vanguard 500 will offset losses from the drop in Vanguard 500's long position.| California High-yield vs. Volumetric Fund Volumetric | California High-yield vs. Abr 7525 Volatility | California High-yield vs. Qs Large Cap | California High-yield vs. Ab Value Fund |
| Vanguard 500 vs. Gamco Global Telecommunications | Vanguard 500 vs. California High Yield Municipal | Vanguard 500 vs. Victory High Income | Vanguard 500 vs. Ab Impact 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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