Correlation Between The National and California High-yield
Can any of the company-specific risk be diversified away by investing in both The National 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 The National 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 The National Tax Free and California High Yield Municipal, you can compare the effects of market volatilities on The National 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 The National with a short position of California High-yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of The National and California High-yield.
Diversification Opportunities for The National and California High-yield
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between THE and California is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding The National Tax Free 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 The National 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 The National 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 The National i.e., The National and California High-yield go up and down completely randomly.
Pair Corralation between The National and California High-yield
Assuming the 90 days horizon The National is expected to generate 1.49 times less return on investment than California High-yield. But when comparing it to its historical volatility, The National Tax Free is 1.26 times less risky than California High-yield. It trades about 0.13 of its potential returns per unit of risk. California High Yield Municipal is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 975.00 in California High Yield Municipal on August 24, 2024 and sell it today you would earn a total of 11.00 from holding California High Yield Municipal or generate 1.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The National Tax Free vs. California High Yield Municipa
Performance |
| Timeline |
| National Tax |
| California High Yield |
The National and California High-yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with The National and California High-yield
The main advantage of trading using opposite The National and California High-yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The National 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 National vs. The Missouri Tax Free | The National vs. The Bond Fund | The National vs. High Yield Municipal Fund | The National vs. Fidelity Intermediate Municipal |
| California High-yield vs. Vanguard California Long Term | California High-yield vs. HUMANA INC | California High-yield vs. Aquagold International | California High-yield vs. Barloworld Ltd ADR |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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