Correlation Between Income Fund and California Bond
Can any of the company-specific risk be diversified away by investing in both Income Fund 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 Income Fund and California Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Income Fund Income and California Bond Fund, you can compare the effects of market volatilities on Income Fund 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 Income Fund with a short position of California Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Fund and California Bond.
Diversification Opportunities for Income Fund and California Bond
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Income and California is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Income Fund 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 Income Fund 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 Income Fund 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 Income Fund i.e., Income Fund and California Bond go up and down completely randomly.
Pair Corralation between Income Fund and California Bond
Assuming the 90 days horizon Income Fund Income is expected to generate 1.41 times more return on investment than California Bond. However, Income Fund is 1.41 times more volatile than California Bond Fund. It trades about 0.05 of its potential returns per unit of risk. California Bond Fund is currently generating about 0.07 per unit of risk. If you would invest 1,052 in Income Fund Income on August 30, 2024 and sell it today you would earn a total of 102.00 from holding Income Fund Income or generate 9.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Income Fund Income vs. California Bond Fund
Performance |
| Timeline |
| Income Fund Income |
| California Bond |
Income Fund and California Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Income Fund and California Bond
The main advantage of trading using opposite Income Fund and California Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income Fund 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.| Income Fund vs. Aqr Long Short Equity | Income Fund vs. Locorr Longshort Modities | Income Fund vs. Astor Longshort Fund | Income Fund vs. Franklin Federal Limited Term |
| California Bond vs. Strategic Allocation Aggressive | California Bond vs. Lgm Risk Managed | California Bond vs. Goldman Sachs High | California Bond vs. Ab Global Risk |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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