Correlation Between Oklahoma Municipal and California Bond
Can any of the company-specific risk be diversified away by investing in both Oklahoma Municipal 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 Oklahoma Municipal and California Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oklahoma Municipal Fund and California Bond Fund, you can compare the effects of market volatilities on Oklahoma Municipal 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 Oklahoma Municipal with a short position of California Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oklahoma Municipal and California Bond.
Diversification Opportunities for Oklahoma Municipal and California Bond
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Oklahoma and California is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Oklahoma Municipal Fund and California Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Bond and Oklahoma 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 Oklahoma Municipal Fund 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 Oklahoma Municipal i.e., Oklahoma Municipal and California Bond go up and down completely randomly.
Pair Corralation between Oklahoma Municipal and California Bond
Assuming the 90 days horizon Oklahoma Municipal Fund is expected to generate 0.99 times more return on investment than California Bond. However, Oklahoma Municipal Fund is 1.01 times less risky than California Bond. It trades about 0.2 of its potential returns per unit of risk. California Bond Fund is currently generating about 0.18 per unit of risk. If you would invest 1,045 in Oklahoma Municipal Fund on November 28, 2024 and sell it today you would earn a total of 11.00 from holding Oklahoma Municipal Fund or generate 1.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oklahoma Municipal Fund vs. California Bond Fund
Performance |
| Timeline |
| Oklahoma Municipal |
| California Bond |
Oklahoma Municipal and California Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oklahoma Municipal and California Bond
The main advantage of trading using opposite Oklahoma Municipal and California Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oklahoma Municipal 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.| Oklahoma Municipal vs. Guidemark E Fixed | Oklahoma Municipal vs. Gmo Quality Fund | Oklahoma Municipal vs. Versatile Bond Portfolio | Oklahoma Municipal vs. Buffalo High Yield |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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