Correlation Between Shelton International and California Tax-free
Can any of the company-specific risk be diversified away by investing in both Shelton International and California Tax-free 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 Shelton International and California Tax-free into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shelton International Select and California Tax Free Income, you can compare the effects of market volatilities on Shelton International and California Tax-free 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 Shelton International with a short position of California Tax-free. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shelton International and California Tax-free.
Diversification Opportunities for Shelton International and California Tax-free
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Shelton and California is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Shelton International Select and California Tax Free Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Tax Free and Shelton International 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 Shelton International Select are associated (or correlated) with California Tax-free. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Tax Free has no effect on the direction of Shelton International i.e., Shelton International and California Tax-free go up and down completely randomly.
Pair Corralation between Shelton International and California Tax-free
Assuming the 90 days horizon Shelton International Select is expected to under-perform the California Tax-free. In addition to that, Shelton International is 2.95 times more volatile than California Tax Free Income. It trades about -0.21 of its total potential returns per unit of risk. California Tax Free Income is currently generating about 0.11 per unit of volatility. If you would invest 1,067 in California Tax Free Income on August 29, 2024 and sell it today you would earn a total of 6.00 from holding California Tax Free Income or generate 0.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Shelton International Select vs. California Tax Free Income
Performance |
| Timeline |
| Shelton International |
| California Tax Free |
Shelton International and California Tax-free Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shelton International and California Tax-free
The main advantage of trading using opposite Shelton International and California Tax-free positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shelton International position performs unexpectedly, California Tax-free 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 Tax-free will offset losses from the drop in California Tax-free's long position.The idea behind Shelton International Select and California Tax Free Income pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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