Correlation Between California Bond and Short Duration
Can any of the company-specific risk be diversified away by investing in both California Bond and Short Duration 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 Short Duration 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 Short Duration Bond, you can compare the effects of market volatilities on California Bond and Short Duration 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 Short Duration. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Bond and Short Duration.
Diversification Opportunities for California Bond and Short Duration
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between California and Short is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and Short Duration Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Duration Bond 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 Short Duration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Duration Bond has no effect on the direction of California Bond i.e., California Bond and Short Duration go up and down completely randomly.
Pair Corralation between California Bond and Short Duration
Assuming the 90 days horizon California Bond Fund is expected to generate 1.76 times more return on investment than Short Duration. However, California Bond is 1.76 times more volatile than Short Duration Bond. It trades about 0.07 of its potential returns per unit of risk. Short Duration Bond is currently generating about 0.1 per unit of risk. If you would invest 967.00 in California Bond Fund on September 3, 2024 and sell it today you would earn a total of 84.00 from holding California Bond Fund or generate 8.69% 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. Short Duration Bond
Performance |
| Timeline |
| California Bond |
| Short Duration Bond |
California Bond and Short Duration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Bond and Short Duration
The main advantage of trading using opposite California Bond and Short Duration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Bond position performs unexpectedly, Short Duration 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 Short Duration will offset losses from the drop in Short Duration'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 |
| Short Duration vs. California Bond Fund | Short Duration vs. Touchstone Premium Yield | Short Duration vs. Blrc Sgy Mnp | Short Duration vs. Transamerica Funds |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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