Correlation Between California Tax-free and Total Return
Can any of the company-specific risk be diversified away by investing in both California Tax-free and Total Return 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 Total Return into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between California Tax Free Fund and Total Return Bond, you can compare the effects of market volatilities on California Tax-free and Total Return 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 Total Return. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Tax-free and Total Return.
Diversification Opportunities for California Tax-free and Total Return
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CALIFORNIA and Total is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding California Tax Free Fund and Total Return Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Return Bond 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 Fund are associated (or correlated) with Total Return. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Return Bond has no effect on the direction of California Tax-free i.e., California Tax-free and Total Return go up and down completely randomly.
Pair Corralation between California Tax-free and Total Return
Assuming the 90 days horizon California Tax Free Fund is expected to generate about the same return on investment as Total Return Bond. But, California Tax Free Fund is 1.55 times less risky than Total Return. It trades about 0.13 of its potential returns per unit of risk. Total Return Bond is currently generating about 0.09 per unit of risk. If you would invest 1,074 in Total Return Bond on September 1, 2024 and sell it today you would earn a total of 39.00 from holding Total Return Bond or generate 3.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
California Tax Free Fund vs. Total Return Bond
Performance |
| Timeline |
| California Tax Free |
| Total Return Bond |
California Tax-free and Total Return Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Tax-free and Total Return
The main advantage of trading using opposite California Tax-free and Total Return positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Tax-free position performs unexpectedly, Total Return 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 Total Return will offset losses from the drop in Total Return's long position.| California Tax-free vs. Transamerica Intermediate Muni | California Tax-free vs. Versatile Bond Portfolio | California Tax-free vs. Bbh Intermediate Municipal | California Tax-free vs. T Rowe Price |
| Total Return vs. Goldman Sachs Government | Total Return vs. Inverse Government Long | Total Return vs. Dunham Porategovernment Bond | Total Return vs. Fidelity Series Government |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
Other Complementary Tools
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity |