Correlation Between Intermediate Term and California High-yield
Can any of the company-specific risk be diversified away by investing in both Intermediate Term and California High-yield 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 Intermediate Term and California High-yield into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intermediate Term Tax Free Bond and California High Yield Municipal, you can compare the effects of market volatilities on Intermediate Term and California High-yield 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 Intermediate Term with a short position of California High-yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intermediate Term and California High-yield.
Diversification Opportunities for Intermediate Term and California High-yield
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Intermediate and California is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Term Tax Free Bon 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 Intermediate Term 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 Intermediate Term Tax Free Bond are associated (or correlated) with California High-yield. 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 Intermediate Term i.e., Intermediate Term and California High-yield go up and down completely randomly.
Pair Corralation between Intermediate Term and California High-yield
Assuming the 90 days horizon Intermediate Term is expected to generate 1.29 times less return on investment than California High-yield. But when comparing it to its historical volatility, Intermediate Term Tax Free Bond is 1.31 times less risky than California High-yield. It trades about 0.19 of its potential returns per unit of risk. California High Yield Municipal is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 982.00 in California High Yield Municipal on September 1, 2024 and sell it today you would earn a total of 13.00 from holding California High Yield Municipal or generate 1.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Intermediate Term Tax Free Bon vs. California High Yield Municipa
Performance |
| Timeline |
| Intermediate Term Tax |
| California High Yield |
Intermediate Term and California High-yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Intermediate Term and California High-yield
The main advantage of trading using opposite Intermediate Term and California High-yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intermediate Term position performs unexpectedly, California High-yield 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-yield will offset losses from the drop in California High-yield's long position.| Intermediate Term vs. Calvert Conservative Allocation | Intermediate Term vs. Adams Diversified Equity | Intermediate Term vs. Lord Abbett Diversified | Intermediate Term vs. Aqr Diversified Arbitrage |
| California High-yield vs. Equity Growth Fund | California High-yield vs. Income Growth Fund | California High-yield vs. Diversified Bond Fund | California High-yield vs. Emerging Markets Fund |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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