Correlation Between Barings Active and California Bond
Can any of the company-specific risk be diversified away by investing in both Barings Active and California Bond 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 Barings Active and California Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barings Active Short and California Bond Fund, you can compare the effects of market volatilities on Barings Active and California Bond 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 Barings Active with a short position of California Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barings Active and California Bond.
Diversification Opportunities for Barings Active and California Bond
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Barings and California is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Barings Active Short and California Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Bond and Barings Active 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 Barings Active Short are associated (or correlated) with California Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Bond has no effect on the direction of Barings Active i.e., Barings Active and California Bond go up and down completely randomly.
Pair Corralation between Barings Active and California Bond
Assuming the 90 days horizon Barings Active is expected to generate 7.43 times less return on investment than California Bond. But when comparing it to its historical volatility, Barings Active Short is 2.94 times less risky than California Bond. It trades about 0.09 of its potential returns per unit of risk. California Bond Fund is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 1,035 in California Bond Fund on September 1, 2024 and sell it today you would earn a total of 16.00 from holding California Bond Fund or generate 1.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Barings Active Short vs. California Bond Fund
Performance |
| Timeline |
| Barings Active Short |
| California Bond |
Barings Active and California Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barings Active and California Bond
The main advantage of trading using opposite Barings Active and California Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barings Active position performs unexpectedly, California Bond 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 Bond will offset losses from the drop in California Bond's long position.| Barings Active vs. Barings Active Short | Barings Active vs. Barings Emerging Markets | Barings Active vs. Barings Emerging Markets | Barings Active vs. Barings Global Floating |
| California Bond vs. Income Fund Income | California Bond vs. Usaa Nasdaq 100 | California Bond vs. Intermediate Term Bond Fund | California Bond vs. Usaa Intermediate Term |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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