Correlation Between NYSE Composite and California Municipal
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and California Municipal 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 NYSE Composite and California Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and California Municipal Portfolio, you can compare the effects of market volatilities on NYSE Composite and California Municipal 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 NYSE Composite with a short position of California Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and California Municipal.
Diversification Opportunities for NYSE Composite and California Municipal
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and California is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and California Municipal Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Municipal and NYSE Composite 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 NYSE Composite are associated (or correlated) with California Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Municipal has no effect on the direction of NYSE Composite i.e., NYSE Composite and California Municipal go up and down completely randomly.
Pair Corralation between NYSE Composite and California Municipal
Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the California Municipal. In addition to that, NYSE Composite is 4.46 times more volatile than California Municipal Portfolio. It trades about -0.21 of its total potential returns per unit of risk. California Municipal Portfolio is currently generating about -0.35 per unit of volatility. If you would invest 1,398 in California Municipal Portfolio on October 12, 2024 and sell it today you would lose (17.00) from holding California Municipal Portfolio or give up 1.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. California Municipal Portfolio
Performance |
| Timeline |
NYSE Composite and California Municipal Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
California Municipal Portfolio
Pair trading matchups for California Municipal
Pair Trading with NYSE Composite and California Municipal
The main advantage of trading using opposite NYSE Composite and California Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, California Municipal 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 Municipal will offset losses from the drop in California Municipal's long position.| NYSE Composite vs. ANTA Sports Products | NYSE Composite vs. Global E Online | NYSE Composite vs. Sonos Inc | NYSE Composite vs. Mattel Inc |
| California Municipal vs. Ab Global E | California Municipal vs. Ab Global E | California Municipal vs. Ab Global E | California Municipal vs. Ab Minnesota Portfolio |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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