Correlation Between Ultra-short Fixed and California Bond
Can any of the company-specific risk be diversified away by investing in both Ultra-short Fixed and California Bond 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 Ultra-short Fixed and California Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ultra Short Fixed Income and California Bond Fund, you can compare the effects of market volatilities on Ultra-short Fixed and California Bond 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 Ultra-short Fixed with a short position of California Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra-short Fixed and California Bond.
Diversification Opportunities for Ultra-short Fixed and California Bond
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ultra-short and California is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Short Fixed Income and California Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Bond and Ultra-short Fixed 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 Ultra Short Fixed Income are associated (or correlated) with California Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Bond has no effect on the direction of Ultra-short Fixed i.e., Ultra-short Fixed and California Bond go up and down completely randomly.
Pair Corralation between Ultra-short Fixed and California Bond
Assuming the 90 days horizon Ultra Short Fixed Income is not expected to generate positive returns. However, Ultra Short Fixed Income is 7.87 times less risky than California Bond. It waists most of its returns potential to compensate for thr risk taken. California Bond is generating about 0.2 per unit of risk. If you would invest 1,032 in California Bond Fund on August 29, 2024 and sell it today you would earn a total of 16.00 from holding California Bond Fund or generate 1.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Ultra Short Fixed Income vs. California Bond Fund
Performance |
| Timeline |
| Ultra Short Fixed |
| California Bond |
Ultra-short Fixed and California Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ultra-short Fixed and California Bond
The main advantage of trading using opposite Ultra-short Fixed and California Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultra-short Fixed position performs unexpectedly, California Bond 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 Bond will offset losses from the drop in California Bond's long position.| Ultra-short Fixed vs. Short Term Fund R | Ultra-short Fixed vs. Putnam Ultra Short | Ultra-short Fixed vs. HUMANA INC | Ultra-short Fixed vs. Aquagold International |
| California Bond vs. Tax Exempt Fund Of | California Bond vs. HUMANA INC | California Bond vs. Aquagold International | California Bond vs. Barloworld Ltd ADR |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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