Correlation Between California Tax-free and New York
Can any of the company-specific risk be diversified away by investing in both California Tax-free and New York 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 California Tax-free and New York into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between California Tax Free Bond and New York Tax Free, you can compare the effects of market volatilities on California Tax-free and New York 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 California Tax-free with a short position of New York. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Tax-free and New York.
Diversification Opportunities for California Tax-free and New York
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between California and New is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding California Tax Free Bond and New York Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New York Tax and California Tax-free 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 California Tax Free Bond are associated (or correlated) with New York. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New York Tax has no effect on the direction of California Tax-free i.e., California Tax-free and New York go up and down completely randomly.
Pair Corralation between California Tax-free and New York
Assuming the 90 days horizon California Tax-free is expected to generate 2.12 times less return on investment than New York. But when comparing it to its historical volatility, California Tax Free Bond is 1.06 times less risky than New York. It trades about 0.08 of its potential returns per unit of risk. New York Tax Free is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,079 in New York Tax Free on August 29, 2024 and sell it today you would earn a total of 15.00 from holding New York Tax Free or generate 1.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
California Tax Free Bond vs. New York Tax Free
Performance |
| Timeline |
| California Tax Free |
| New York Tax |
California Tax-free and New York Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Tax-free and New York
The main advantage of trading using opposite California Tax-free and New York positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Tax-free position performs unexpectedly, New York 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 New York will offset losses from the drop in New York's long position.| California Tax-free vs. T Rowe Price | California Tax-free vs. New York Tax Free | California Tax-free vs. T Rowe Price | California Tax-free vs. T Rowe Price |
| New York vs. New Jersey Tax Free | New York vs. T Rowe Price | New York vs. Virginia Tax Free Bond | New York vs. California Tax Free Bond |
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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