Correlation Between Financial Services and California High-yield
Can any of the company-specific risk be diversified away by investing in both Financial Services and California High-yield 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 Financial Services and California High-yield into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial Services Portfolio and California High Yield Municipal, you can compare the effects of market volatilities on Financial Services and California High-yield 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 Financial Services with a short position of California High-yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Services and California High-yield.
Diversification Opportunities for Financial Services and California High-yield
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Financial and California is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Financial Services Portfolio and California High Yield Municipa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California High Yield and Financial Services 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 Financial Services Portfolio are associated (or correlated) with California High-yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California High Yield has no effect on the direction of Financial Services i.e., Financial Services and California High-yield go up and down completely randomly.
Pair Corralation between Financial Services and California High-yield
Assuming the 90 days horizon Financial Services Portfolio is expected to generate 5.09 times more return on investment than California High-yield. However, Financial Services is 5.09 times more volatile than California High Yield Municipal. It trades about 0.24 of its potential returns per unit of risk. California High Yield Municipal is currently generating about 0.14 per unit of risk. If you would invest 951.00 in Financial Services Portfolio on August 25, 2024 and sell it today you would earn a total of 85.00 from holding Financial Services Portfolio or generate 8.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial Services Portfolio vs. California High Yield Municipa
Performance |
| Timeline |
| Financial Services |
| California High Yield |
Financial Services and California High-yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial Services and California High-yield
The main advantage of trading using opposite Financial Services and California High-yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Services position performs unexpectedly, California High-yield 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 High-yield will offset losses from the drop in California High-yield's long position.| Financial Services vs. California High Yield Municipal | Financial Services vs. Ab Impact Municipal | Financial Services vs. Nuveen All American Municipal | Financial Services vs. Franklin High Yield |
| California High-yield vs. Kinetics Spin Off And | California High-yield vs. Chartwell Short Duration | California High-yield vs. Victory High Income | California High-yield vs. Mirova Global Green |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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