Correlation Between Fabwx and Stet California
Can any of the company-specific risk be diversified away by investing in both Fabwx and Stet California 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 Fabwx and Stet California into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fabwx and Stet California Municipal, you can compare the effects of market volatilities on Fabwx and Stet California 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 Fabwx with a short position of Stet California. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fabwx and Stet California.
Diversification Opportunities for Fabwx and Stet California
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Fabwx and Stet is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Fabwx and Stet California Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stet California Municipal and Fabwx 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 Fabwx are associated (or correlated) with Stet California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stet California Municipal has no effect on the direction of Fabwx i.e., Fabwx and Stet California go up and down completely randomly.
Pair Corralation between Fabwx and Stet California
Assuming the 90 days horizon Fabwx is expected to generate 6.88 times more return on investment than Stet California. However, Fabwx is 6.88 times more volatile than Stet California Municipal. It trades about 0.12 of its potential returns per unit of risk. Stet California Municipal is currently generating about -0.02 per unit of risk. If you would invest 1,503 in Fabwx on November 3, 2024 and sell it today you would earn a total of 53.00 from holding Fabwx or generate 3.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Fabwx vs. Stet California Municipal
Performance |
| Timeline |
| Fabwx |
| Stet California Municipal |
Fabwx and Stet California Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fabwx and Stet California
The main advantage of trading using opposite Fabwx and Stet California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fabwx position performs unexpectedly, Stet California 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 Stet California will offset losses from the drop in Stet California's long position.| Fabwx vs. Federated Government Income | Fabwx vs. Intermediate Term Tax Free Bond | Fabwx vs. Jpmorgan Ultra Short Municipal | Fabwx vs. California Municipal Portfolio |
| Stet California vs. Prudential Financial Services | Stet California vs. Hewitt Money Market | Stet California vs. Rmb Mendon Financial | Stet California vs. Financial Industries Fund |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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