Correlation Between California Municipal and Nasdaq-100(r)
Can any of the company-specific risk be diversified away by investing in both California Municipal and Nasdaq-100(r) 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 Nasdaq-100(r) 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 Nasdaq 100 2x Strategy, you can compare the effects of market volatilities on California Municipal and Nasdaq-100(r) 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 Nasdaq-100(r). Check out your portfolio center. Please also check ongoing floating volatility patterns of California Municipal and Nasdaq-100(r).
Diversification Opportunities for California Municipal and Nasdaq-100(r)
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between California and Nasdaq-100(r) is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding California Municipal Portfolio and Nasdaq 100 2x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 2x 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 Nasdaq-100(r). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq 100 2x has no effect on the direction of California Municipal i.e., California Municipal and Nasdaq-100(r) go up and down completely randomly.
Pair Corralation between California Municipal and Nasdaq-100(r)
Assuming the 90 days horizon California Municipal Portfolio is expected to generate 0.05 times more return on investment than Nasdaq-100(r). However, California Municipal Portfolio is 18.24 times less risky than Nasdaq-100(r). It trades about -0.35 of its potential returns per unit of risk. Nasdaq 100 2x Strategy is currently generating about -0.2 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 | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
California Municipal Portfolio vs. Nasdaq 100 2x Strategy
Performance |
| Timeline |
| California Municipal |
| Nasdaq 100 2x |
California Municipal and Nasdaq-100(r) Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Municipal and Nasdaq-100(r)
The main advantage of trading using opposite California Municipal and Nasdaq-100(r) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Municipal position performs unexpectedly, Nasdaq-100(r) 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 Nasdaq-100(r) will offset losses from the drop in Nasdaq-100(r)'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 |
| Nasdaq-100(r) vs. California Municipal Portfolio | Nasdaq-100(r) vs. Aig Government Money | Nasdaq-100(r) vs. Dreyfus Municipal Bond | Nasdaq-100(r) vs. Lord Abbett Intermediate |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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