Correlation Between Diversified Bond and California Intermediate-ter
Can any of the company-specific risk be diversified away by investing in both Diversified Bond and California Intermediate-ter 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 Diversified Bond and California Intermediate-ter into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diversified Bond Fund and California Intermediate Term Tax Free, you can compare the effects of market volatilities on Diversified Bond and California Intermediate-ter 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 Diversified Bond with a short position of California Intermediate-ter. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diversified Bond and California Intermediate-ter.
Diversification Opportunities for Diversified Bond and California Intermediate-ter
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Diversified and California is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Diversified Bond Fund and California Intermediate Term T in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Intermediate-ter and Diversified Bond 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 Diversified Bond Fund are associated (or correlated) with California Intermediate-ter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Intermediate-ter has no effect on the direction of Diversified Bond i.e., Diversified Bond and California Intermediate-ter go up and down completely randomly.
Pair Corralation between Diversified Bond and California Intermediate-ter
Assuming the 90 days horizon Diversified Bond Fund is expected to generate 2.51 times more return on investment than California Intermediate-ter. However, Diversified Bond is 2.51 times more volatile than California Intermediate Term Tax Free. It trades about 0.02 of its potential returns per unit of risk. California Intermediate Term Tax Free is currently generating about 0.06 per unit of risk. If you would invest 881.00 in Diversified Bond Fund on September 1, 2024 and sell it today you would earn a total of 42.00 from holding Diversified Bond Fund or generate 4.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Diversified Bond Fund vs. California Intermediate Term T
Performance |
| Timeline |
| Diversified Bond |
| California Intermediate-ter |
Diversified Bond and California Intermediate-ter Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diversified Bond and California Intermediate-ter
The main advantage of trading using opposite Diversified Bond and California Intermediate-ter positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diversified Bond position performs unexpectedly, California Intermediate-ter 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 Intermediate-ter will offset losses from the drop in California Intermediate-ter's long position.| Diversified Bond vs. The Hartford Inflation | Diversified Bond vs. Arrow Managed Futures | Diversified Bond vs. Lord Abbett Inflation | Diversified Bond vs. Asg Managed Futures |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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