Correlation Between California Bond and Rational Dividend
Can any of the company-specific risk be diversified away by investing in both California Bond and Rational Dividend 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 Bond and Rational Dividend into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between California Bond Fund and Rational Dividend Capture, you can compare the effects of market volatilities on California Bond and Rational Dividend 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 Bond with a short position of Rational Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Bond and Rational Dividend.
Diversification Opportunities for California Bond and Rational Dividend
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between California and Rational is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and Rational Dividend Capture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rational Dividend Capture and California Bond 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 Bond Fund are associated (or correlated) with Rational Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rational Dividend Capture has no effect on the direction of California Bond i.e., California Bond and Rational Dividend go up and down completely randomly.
Pair Corralation between California Bond and Rational Dividend
Assuming the 90 days horizon California Bond is expected to generate 5.79 times less return on investment than Rational Dividend. But when comparing it to its historical volatility, California Bond Fund is 2.4 times less risky than Rational Dividend. It trades about 0.04 of its potential returns per unit of risk. Rational Dividend Capture is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 972.00 in Rational Dividend Capture on October 25, 2024 and sell it today you would earn a total of 11.00 from holding Rational Dividend Capture or generate 1.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
California Bond Fund vs. Rational Dividend Capture
Performance |
| Timeline |
| California Bond |
| Rational Dividend Capture |
California Bond and Rational Dividend Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Bond and Rational Dividend
The main advantage of trading using opposite California Bond and Rational Dividend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Bond position performs unexpectedly, Rational Dividend 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 Rational Dividend will offset losses from the drop in Rational Dividend's long position.| California Bond vs. Franklin California Tax Free | California Bond vs. Franklin California Tax Free | California Bond vs. Franklin California Tax Free | California Bond vs. Franklin California Tax Free |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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