Correlation Between California Intermediate-ter and California High-yield
Can any of the company-specific risk be diversified away by investing in both California Intermediate-ter and California High-yield 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 Intermediate-ter and California High-yield into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between California Intermediate Term Tax Free and California High Yield Municipal, you can compare the effects of market volatilities on California Intermediate-ter and California High-yield 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 Intermediate-ter with a short position of California High-yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Intermediate-ter and California High-yield.
Diversification Opportunities for California Intermediate-ter and California High-yield
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between California and California is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding California Intermediate Term T and California High Yield Municipa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California High Yield and California Intermediate-ter 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 Intermediate Term Tax Free are associated (or correlated) with California High-yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California High Yield has no effect on the direction of California Intermediate-ter i.e., California Intermediate-ter and California High-yield go up and down completely randomly.
Pair Corralation between California Intermediate-ter and California High-yield
Assuming the 90 days horizon California Intermediate Term Tax Free is expected to generate 0.68 times more return on investment than California High-yield. However, California Intermediate Term Tax Free is 1.46 times less risky than California High-yield. It trades about -0.05 of its potential returns per unit of risk. California High Yield Municipal is currently generating about -0.11 per unit of risk. If you would invest 1,118 in California Intermediate Term Tax Free on November 4, 2024 and sell it today you would lose (2.00) from holding California Intermediate Term Tax Free or give up 0.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
California Intermediate Term T vs. California High Yield Municipa
Performance |
| Timeline |
| California Intermediate-ter |
| California High Yield |
California Intermediate-ter and California High-yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Intermediate-ter and California High-yield
The main advantage of trading using opposite California Intermediate-ter and California High-yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Intermediate-ter position performs unexpectedly, California High-yield 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 High-yield will offset losses from the drop in California High-yield's long position.The idea behind California Intermediate Term Tax Free and California High Yield Municipal 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.
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data |