Correlation Between California High-yield and Ginnie Mae
Can any of the company-specific risk be diversified away by investing in both California High-yield and Ginnie Mae 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 Ginnie Mae 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 Ginnie Mae Fund, you can compare the effects of market volatilities on California High-yield and Ginnie Mae 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 Ginnie Mae. Check out your portfolio center. Please also check ongoing floating volatility patterns of California High-yield and Ginnie Mae.
Diversification Opportunities for California High-yield and Ginnie Mae
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between California and Ginnie is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding California High Yield Municipa and Ginnie Mae Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ginnie Mae Fund 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 Ginnie Mae. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ginnie Mae Fund has no effect on the direction of California High-yield i.e., California High-yield and Ginnie Mae go up and down completely randomly.
Pair Corralation between California High-yield and Ginnie Mae
Assuming the 90 days horizon California High Yield Municipal is expected to under-perform the Ginnie Mae. But the mutual fund apears to be less risky and, when comparing its historical volatility, California High Yield Municipal is 1.52 times less risky than Ginnie Mae. The mutual fund trades about -0.11 of its potential returns per unit of risk. The Ginnie Mae Fund is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 875.00 in Ginnie Mae Fund on November 4, 2024 and sell it today you would earn a total of 3.00 from holding Ginnie Mae Fund or generate 0.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
California High Yield Municipa vs. Ginnie Mae Fund
Performance |
| Timeline |
| California High Yield |
| Ginnie Mae Fund |
California High-yield and Ginnie Mae Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California High-yield and Ginnie Mae
The main advantage of trading using opposite California High-yield and Ginnie Mae positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California High-yield position performs unexpectedly, Ginnie Mae 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 Ginnie Mae will offset losses from the drop in Ginnie Mae's long position.The idea behind California High Yield Municipal and Ginnie Mae Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 CEOs Directory module to screen CEOs from public companies around the world.
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