Correlation Between California Municipal and Old Westbury
Can any of the company-specific risk be diversified away by investing in both California Municipal and Old Westbury 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 Old Westbury 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 Old Westbury Municipal, you can compare the effects of market volatilities on California Municipal and Old Westbury 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 Old Westbury. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Municipal and Old Westbury.
Diversification Opportunities for California Municipal and Old Westbury
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between California and Old is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding California Municipal Portfolio and Old Westbury Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Westbury Municipal 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 Old Westbury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Westbury Municipal has no effect on the direction of California Municipal i.e., California Municipal and Old Westbury go up and down completely randomly.
Pair Corralation between California Municipal and Old Westbury
Assuming the 90 days horizon California Municipal is expected to generate 1.66 times less return on investment than Old Westbury. But when comparing it to its historical volatility, California Municipal Portfolio is 1.05 times less risky than Old Westbury. It trades about 0.18 of its potential returns per unit of risk. Old Westbury Municipal is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 1,141 in Old Westbury Municipal on November 9, 2024 and sell it today you would earn a total of 11.00 from holding Old Westbury Municipal or generate 0.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
California Municipal Portfolio vs. Old Westbury Municipal
Performance |
| Timeline |
| California Municipal |
| Old Westbury Municipal |
California Municipal and Old Westbury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Municipal and Old Westbury
The main advantage of trading using opposite California Municipal and Old Westbury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Municipal position performs unexpectedly, Old Westbury 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 Old Westbury will offset losses from the drop in Old Westbury's long position.| California Municipal vs. Gold And Precious | California Municipal vs. Precious Metals And | California Municipal vs. Wells Fargo Advantage | California Municipal vs. Sprott Gold Equity |
| Old Westbury vs. High Yield Fund | Old Westbury vs. Siit High Yield | Old Westbury vs. Lord Abbett Short | Old Westbury vs. Dunham High Yield |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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