Correlation Between California Bond and Versatile Bond
Can any of the company-specific risk be diversified away by investing in both California Bond and Versatile 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 California Bond and Versatile Bond 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 Versatile Bond Portfolio, you can compare the effects of market volatilities on California Bond and Versatile 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 California Bond with a short position of Versatile Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Bond and Versatile Bond.
Diversification Opportunities for California Bond and Versatile Bond
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between California and Versatile is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and Versatile Bond Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Versatile Bond Portfolio 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 Versatile Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Versatile Bond Portfolio has no effect on the direction of California Bond i.e., California Bond and Versatile Bond go up and down completely randomly.
Pair Corralation between California Bond and Versatile Bond
Assuming the 90 days horizon California Bond Fund is expected to generate 3.17 times more return on investment than Versatile Bond. However, California Bond is 3.17 times more volatile than Versatile Bond Portfolio. It trades about 0.16 of its potential returns per unit of risk. Versatile Bond Portfolio is currently generating about -0.01 per unit of risk. If you would invest 1,032 in California Bond Fund on August 27, 2024 and sell it today you would earn a total of 12.00 from holding California Bond Fund or generate 1.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
California Bond Fund vs. Versatile Bond Portfolio
Performance |
| Timeline |
| California Bond |
| Versatile Bond Portfolio |
California Bond and Versatile Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Bond and Versatile Bond
The main advantage of trading using opposite California Bond and Versatile Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Bond position performs unexpectedly, Versatile 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 Versatile Bond will offset losses from the drop in Versatile Bond's long position.| California Bond vs. Nuveen Minnesota Municipal | California Bond vs. Morningstar Defensive Bond | California Bond vs. Intermediate Term Bond Fund | California Bond vs. Ishares Municipal Bond |
| Versatile Bond vs. Short Term Treasury Portfolio | Versatile Bond vs. Aggressive Growth Portfolio | Versatile Bond vs. Permanent Portfolio Class | Versatile Bond vs. Thompson 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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