Correlation Between California Municipal and Ab Global
Can any of the company-specific risk be diversified away by investing in both California Municipal and Ab Global 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 Municipal and Ab Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between California Municipal Portfolio and Ab Global E, you can compare the effects of market volatilities on California Municipal and Ab Global 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 Municipal with a short position of Ab Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Municipal and Ab Global.
Diversification Opportunities for California Municipal and Ab Global
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between California and GCEAX is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding California Municipal Portfolio and Ab Global E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Global E and California Municipal 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 Municipal Portfolio are associated (or correlated) with Ab Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Global E has no effect on the direction of California Municipal i.e., California Municipal and Ab Global go up and down completely randomly.
Pair Corralation between California Municipal and Ab Global
Assuming the 90 days horizon California Municipal Portfolio is expected to generate 0.19 times more return on investment than Ab Global. However, California Municipal Portfolio is 5.18 times less risky than Ab Global. It trades about -0.35 of its potential returns per unit of risk. Ab Global E is currently generating about -0.32 per unit of risk. If you would invest 1,398 in California Municipal Portfolio on October 12, 2024 and sell it today you would lose (17.00) from holding California Municipal Portfolio or give up 1.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
California Municipal Portfolio vs. Ab Global E
Performance |
| Timeline |
| California Municipal |
| Ab Global E |
California Municipal and Ab Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Municipal and Ab Global
The main advantage of trading using opposite California Municipal and Ab Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Municipal position performs unexpectedly, Ab Global 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 Ab Global will offset losses from the drop in Ab Global's long position.| California Municipal vs. Ab Global E | California Municipal vs. Ab Global E | California Municipal vs. Ab Global E | California Municipal vs. Ab Minnesota Portfolio |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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