Correlation Between California Tax-free and Transamerica Intermediate
Can any of the company-specific risk be diversified away by investing in both California Tax-free and Transamerica Intermediate 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 Transamerica Intermediate 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 Transamerica Intermediate Muni, you can compare the effects of market volatilities on California Tax-free and Transamerica Intermediate 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 Transamerica Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Tax-free and Transamerica Intermediate.
Diversification Opportunities for California Tax-free and Transamerica Intermediate
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between CALIFORNIA and Transamerica is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding California Tax Free Fund and Transamerica Intermediate Muni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Intermediate 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 Transamerica Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Intermediate has no effect on the direction of California Tax-free i.e., California Tax-free and Transamerica Intermediate go up and down completely randomly.
Pair Corralation between California Tax-free and Transamerica Intermediate
Assuming the 90 days horizon California Tax-free is expected to generate 1.19 times less return on investment than Transamerica Intermediate. In addition to that, California Tax-free is 1.0 times more volatile than Transamerica Intermediate Muni. It trades about 0.18 of its total potential returns per unit of risk. Transamerica Intermediate Muni is currently generating about 0.22 per unit of volatility. If you would invest 1,073 in Transamerica Intermediate Muni on September 1, 2024 and sell it today you would earn a total of 15.00 from holding Transamerica Intermediate Muni or generate 1.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
California Tax Free Fund vs. Transamerica Intermediate Muni
Performance |
| Timeline |
| California Tax Free |
| Transamerica Intermediate |
California Tax-free and Transamerica Intermediate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Tax-free and Transamerica Intermediate
The main advantage of trading using opposite California Tax-free and Transamerica Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Tax-free position performs unexpectedly, Transamerica Intermediate 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 Transamerica Intermediate will offset losses from the drop in Transamerica Intermediate'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 |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
Other Complementary Tools
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios |