Correlation Between California High and California Municipal
Can any of the company-specific risk be diversified away by investing in both California High and California 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 and California 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 California Municipal Fund, you can compare the effects of market volatilities on California High and California 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 with a short position of California Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of California High and California Municipal.
Diversification Opportunities for California High and California Municipal
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between California and California is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding California High Yield Municipa and California Municipal Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Municipal and California High 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 California Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Municipal has no effect on the direction of California High i.e., California High and California Municipal go up and down completely randomly.
Pair Corralation between California High and California Municipal
Assuming the 90 days horizon California High Yield Municipal is expected to generate 1.57 times more return on investment than California Municipal. However, California High is 1.57 times more volatile than California Municipal Fund. It trades about 0.08 of its potential returns per unit of risk. California Municipal Fund is currently generating about 0.09 per unit of risk. If you would invest 920.00 in California High Yield Municipal on September 12, 2024 and sell it today you would earn a total of 78.00 from holding California High Yield Municipal or generate 8.48% 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. California Municipal Fund
Performance |
| Timeline |
| California High Yield |
| California Municipal |
California High and California Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California High and California Municipal
The main advantage of trading using opposite California High and California Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California High position performs unexpectedly, California 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 California Municipal will offset losses from the drop in California Municipal's long position.| California High vs. California Intermediate Term Tax Free | California High vs. Fidelity California Municipal | California High vs. Vanguard California Long Term | California High vs. Nuveen California High |
| California Municipal vs. Pender Real Estate | California Municipal vs. Vy Clarion Real | California Municipal vs. Goldman Sachs Real | California Municipal vs. Jhancock Real Estate |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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