Correlation Between California Bond and Icon Financial
Can any of the company-specific risk be diversified away by investing in both California Bond and Icon Financial 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 Icon Financial 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 Icon Financial Fund, you can compare the effects of market volatilities on California Bond and Icon Financial 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 Icon Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Bond and Icon Financial.
Diversification Opportunities for California Bond and Icon Financial
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between California and Icon is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and Icon Financial Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Financial 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 Icon Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Financial has no effect on the direction of California Bond i.e., California Bond and Icon Financial go up and down completely randomly.
Pair Corralation between California Bond and Icon Financial
Assuming the 90 days horizon California Bond is expected to generate 2.06 times less return on investment than Icon Financial. But when comparing it to its historical volatility, California Bond Fund is 3.4 times less risky than Icon Financial. It trades about 0.21 of its potential returns per unit of risk. Icon Financial Fund is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,082 in Icon Financial Fund on August 24, 2024 and sell it today you would earn a total of 38.00 from holding Icon Financial Fund or generate 3.51% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
California Bond Fund vs. Icon Financial Fund
Performance |
Timeline |
California Bond |
Icon Financial |
California Bond and Icon Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with California Bond and Icon Financial
The main advantage of trading using opposite California Bond and Icon Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Bond position performs unexpectedly, Icon Financial 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 Icon Financial will offset losses from the drop in Icon Financial's long position.California Bond vs. Vanguard California Long Term | California Bond vs. HUMANA INC | California Bond vs. Aquagold International | California Bond vs. Barloworld Ltd ADR |
Icon Financial vs. Nuveen Minnesota Municipal | Icon Financial vs. Multisector Bond Sma | Icon Financial vs. Metropolitan West Porate | Icon Financial vs. California Bond 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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