Correlation Between Nebraska Municipal and California High-yield
Can any of the company-specific risk be diversified away by investing in both Nebraska Municipal 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 Nebraska Municipal 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 Nebraska Municipal Fund and California High Yield Municipal, you can compare the effects of market volatilities on Nebraska Municipal 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 Nebraska Municipal with a short position of California High-yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nebraska Municipal and California High-yield.
Diversification Opportunities for Nebraska Municipal and California High-yield
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Nebraska and California is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Nebraska Municipal Fund 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 Nebraska Municipal 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 Nebraska Municipal Fund 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 Nebraska Municipal i.e., Nebraska Municipal and California High-yield go up and down completely randomly.
Pair Corralation between Nebraska Municipal and California High-yield
Assuming the 90 days horizon Nebraska Municipal Fund is expected to generate 1.17 times more return on investment than California High-yield. However, Nebraska Municipal is 1.17 times more volatile than California High Yield Municipal. It trades about 0.23 of its potential returns per unit of risk. California High Yield Municipal is currently generating about 0.19 per unit of risk. If you would invest 926.00 in Nebraska Municipal Fund on September 1, 2024 and sell it today you would earn a total of 17.00 from holding Nebraska Municipal Fund or generate 1.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nebraska Municipal Fund vs. California High Yield Municipa
Performance |
| Timeline |
| Nebraska Municipal |
| California High Yield |
Nebraska Municipal and California High-yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nebraska Municipal and California High-yield
The main advantage of trading using opposite Nebraska Municipal and California High-yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nebraska Municipal 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.| Nebraska Municipal vs. Lord Abbett Convertible | Nebraska Municipal vs. Harbor Vertible Securities | Nebraska Municipal vs. Virtus Convertible | Nebraska Municipal vs. Rationalpier 88 Convertible |
| California High-yield vs. Equity Growth Fund | California High-yield vs. Income Growth Fund | California High-yield vs. Diversified Bond Fund | California High-yield vs. Emerging Markets 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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