Correlation Between Nasdaq-100 Index and California Tax-free
Can any of the company-specific risk be diversified away by investing in both Nasdaq-100 Index 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 Nasdaq-100 Index 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 Nasdaq 100 Index Fund and California Tax Free Income, you can compare the effects of market volatilities on Nasdaq-100 Index 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 Nasdaq-100 Index with a short position of California Tax-free. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100 Index and California Tax-free.
Diversification Opportunities for Nasdaq-100 Index and California Tax-free
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nasdaq-100 and California is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 Index Fund and California Tax Free Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Tax Free and Nasdaq-100 Index 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 Nasdaq 100 Index Fund 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 Nasdaq-100 Index i.e., Nasdaq-100 Index and California Tax-free go up and down completely randomly.
Pair Corralation between Nasdaq-100 Index and California Tax-free
Assuming the 90 days horizon Nasdaq 100 Index Fund is expected to under-perform the California Tax-free. In addition to that, Nasdaq-100 Index is 7.96 times more volatile than California Tax Free Income. It trades about -0.05 of its total potential returns per unit of risk. California Tax Free Income is currently generating about 0.17 per unit of volatility. If you would invest 1,068 in California Tax Free Income on September 4, 2024 and sell it today you would earn a total of 9.00 from holding California Tax Free Income or generate 0.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq 100 Index Fund vs. California Tax Free Income
Performance |
| Timeline |
| Nasdaq 100 Index |
| California Tax Free |
Nasdaq-100 Index and California Tax-free Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq-100 Index and California Tax-free
The main advantage of trading using opposite Nasdaq-100 Index and California Tax-free positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100 Index 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.| Nasdaq-100 Index vs. American Funds Conservative | Nasdaq-100 Index vs. Fidelity Advisor Diversified | Nasdaq-100 Index vs. Harbor Diversified International | Nasdaq-100 Index vs. Lord Abbett 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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