Correlation Between California Bond and Inflation Protection
Can any of the company-specific risk be diversified away by investing in both California Bond and Inflation Protection 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 Inflation Protection 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 Inflation Protection Fund, you can compare the effects of market volatilities on California Bond and Inflation Protection 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 Inflation Protection. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Bond and Inflation Protection.
Diversification Opportunities for California Bond and Inflation Protection
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between California and Inflation is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and Inflation Protection Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inflation Protection 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 Inflation Protection. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inflation Protection has no effect on the direction of California Bond i.e., California Bond and Inflation Protection go up and down completely randomly.
Pair Corralation between California Bond and Inflation Protection
Assuming the 90 days horizon California Bond Fund is expected to generate 0.77 times more return on investment than Inflation Protection. However, California Bond Fund is 1.3 times less risky than Inflation Protection. It trades about 0.07 of its potential returns per unit of risk. Inflation Protection Fund is currently generating about 0.04 per unit of risk. If you would invest 979.00 in California Bond Fund on September 2, 2024 and sell it today you would earn a total of 72.00 from holding California Bond Fund or generate 7.35% 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. Inflation Protection Fund
Performance |
| Timeline |
| California Bond |
| Inflation Protection |
California Bond and Inflation Protection Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Bond and Inflation Protection
The main advantage of trading using opposite California Bond and Inflation Protection positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Bond position performs unexpectedly, Inflation Protection 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 Inflation Protection will offset losses from the drop in Inflation Protection's long position.| California Bond vs. Tiaa Cref Lifestyle Moderate | California Bond vs. Fidelity Managed Retirement | California Bond vs. Transamerica Cleartrack Retirement | California Bond vs. Dimensional Retirement Income |
| Inflation Protection vs. Siit High Yield | Inflation Protection vs. Metropolitan West High | Inflation Protection vs. Ab Global Risk | Inflation Protection vs. Franklin High Income |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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