Correlation Between California Municipal and California High
Can any of the company-specific risk be diversified away by investing in both California Municipal and California High 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 California High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between California Municipal Fund and California High Yield Municipal, you can compare the effects of market volatilities on California Municipal and California High 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 California High. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Municipal and California High.
Diversification Opportunities for California Municipal and California High
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between California and California is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding California Municipal Fund 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 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 Fund are associated (or correlated) with California High. 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 California Municipal i.e., California Municipal and California High go up and down completely randomly.
Pair Corralation between California Municipal and California High
Assuming the 90 days horizon California Municipal is expected to generate 1.45 times less return on investment than California High. But when comparing it to its historical volatility, California Municipal Fund is 1.57 times less risky than California High. It trades about 0.09 of its potential returns per unit of risk. California High Yield Municipal is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 920.00 in California High Yield Municipal on September 12, 2024 and sell it today you would earn a total of 78.00 from holding California High Yield Municipal or generate 8.48% 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 Fund vs. California High Yield Municipa
Performance |
| Timeline |
| California Municipal |
| California High Yield |
California Municipal and California High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Municipal and California High
The main advantage of trading using opposite California Municipal and California High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Municipal position performs unexpectedly, California High 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 will offset losses from the drop in California High's long position.| California Municipal vs. Pender Real Estate | California Municipal vs. Vy Clarion Real | California Municipal vs. Goldman Sachs Real | California Municipal vs. Jhancock Real Estate |
| California High vs. California Intermediate Term Tax Free | California High vs. Fidelity California Municipal | California High vs. Vanguard California Long Term | California High vs. Nuveen California High |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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