Correlation Between Federated High and California Bond
Can any of the company-specific risk be diversified away by investing in both Federated High 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 Federated High and California Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated High Yield and California Bond Fund, you can compare the effects of market volatilities on Federated High 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 Federated High with a short position of California Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated High and California Bond.
Diversification Opportunities for Federated High and California Bond
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Federated and California is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Federated High Yield and California Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Bond and Federated High 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 Federated High Yield 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 Federated High i.e., Federated High and California Bond go up and down completely randomly.
Pair Corralation between Federated High and California Bond
Assuming the 90 days horizon Federated High is expected to generate 1.95 times less return on investment than California Bond. But when comparing it to its historical volatility, Federated High Yield is 2.14 times less risky than California Bond. It trades about 0.24 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 1,026 in California Bond Fund on August 24, 2024 and sell it today you would earn a total of 18.00 from holding California Bond Fund or generate 1.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Federated High Yield vs. California Bond Fund
Performance |
| Timeline |
| Federated High Yield |
| California Bond |
Federated High and California Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated High and California Bond
The main advantage of trading using opposite Federated High and California Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated High 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.| Federated High vs. Institutional Fiduciary Trust | Federated High vs. Ashmore Emerging Markets | Federated High vs. Rbc Funds Trust | Federated High vs. Usaa Mutual Funds |
| California Bond vs. Vanguard California Long Term | California Bond vs. HUMANA INC | California Bond vs. Aquagold International | California Bond 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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