Correlation Between Barings Emerging and California Tax-free
Can any of the company-specific risk be diversified away by investing in both Barings Emerging and California Tax-free 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 Emerging and California Tax-free into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barings Emerging Markets and California Tax Free Fund, you can compare the effects of market volatilities on Barings Emerging and California Tax-free 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 Emerging with a short position of California Tax-free. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barings Emerging and California Tax-free.
Diversification Opportunities for Barings Emerging and California Tax-free
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Barings and California is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Barings Emerging Markets and California Tax Free Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Tax Free and Barings Emerging 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 Emerging Markets are associated (or correlated) with California Tax-free. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Tax Free has no effect on the direction of Barings Emerging i.e., Barings Emerging and California Tax-free go up and down completely randomly.
Pair Corralation between Barings Emerging and California Tax-free
Assuming the 90 days horizon Barings Emerging is expected to generate 9.09 times less return on investment than California Tax-free. In addition to that, Barings Emerging is 1.07 times more volatile than California Tax Free Fund. It trades about 0.02 of its total potential returns per unit of risk. California Tax Free Fund is currently generating about 0.2 per unit of volatility. If you would invest 1,078 in California Tax Free Fund on August 30, 2024 and sell it today you would earn a total of 14.00 from holding California Tax Free Fund or generate 1.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Barings Emerging Markets vs. California Tax Free Fund
Performance |
| Timeline |
| Barings Emerging Markets |
| California Tax Free |
Barings Emerging and California Tax-free Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barings Emerging and California Tax-free
The main advantage of trading using opposite Barings Emerging and California Tax-free positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barings Emerging position performs unexpectedly, California Tax-free 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 Tax-free will offset losses from the drop in California Tax-free's long position.| Barings Emerging vs. HUMANA INC | Barings Emerging vs. Aquagold International | Barings Emerging vs. Barloworld Ltd ADR | Barings Emerging vs. Morningstar Unconstrained Allocation |
| California Tax-free vs. Pgim Jennison Diversified | California Tax-free vs. T Rowe Price | California Tax-free vs. Guggenheim Diversified Income | California Tax-free vs. Huber Capital Diversified |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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