Correlation Between California Bond and Us Government
Can any of the company-specific risk be diversified away by investing in both California Bond and Us Government 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 Us Government 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 Us Government Securities, you can compare the effects of market volatilities on California Bond and Us Government 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 Us Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Bond and Us Government.
Diversification Opportunities for California Bond and Us Government
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between California and RGVCX is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and Us Government Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Government Securities 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 Us Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Government Securities has no effect on the direction of California Bond i.e., California Bond and Us Government go up and down completely randomly.
Pair Corralation between California Bond and Us Government
Assuming the 90 days horizon California Bond Fund is expected to generate 0.67 times more return on investment than Us Government. However, California Bond Fund is 1.5 times less risky than Us Government. It trades about 0.06 of its potential returns per unit of risk. Us Government Securities is currently generating about 0.03 per unit of risk. If you would invest 991.00 in California Bond Fund on September 12, 2024 and sell it today you would earn a total of 61.00 from holding California Bond Fund or generate 6.16% 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. Us Government Securities
Performance |
| Timeline |
| California Bond |
| Us Government Securities |
California Bond and Us Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Bond and Us Government
The main advantage of trading using opposite California Bond and Us Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Bond position performs unexpectedly, Us Government 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 Us Government will offset losses from the drop in Us Government's long position.| California Bond vs. Vanguard California Long Term | California Bond vs. Vanguard California Long Term | California Bond vs. SCOR PK | California Bond vs. Morningstar Unconstrained Allocation |
| Us Government vs. California Bond Fund | Us Government vs. Ishares Municipal Bond | Us Government vs. Blrc Sgy Mnp | Us Government vs. Versatile Bond Portfolio |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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