Correlation Between California Bond and Us Small
Can any of the company-specific risk be diversified away by investing in both California Bond and Us Small 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 Small 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 Small Cap, you can compare the effects of market volatilities on California Bond and Us Small 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 Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Bond and Us Small.
Diversification Opportunities for California Bond and Us Small
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between California and RSCRX is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and Us Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Small Cap 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 Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Small Cap has no effect on the direction of California Bond i.e., California Bond and Us Small go up and down completely randomly.
Pair Corralation between California Bond and Us Small
Assuming the 90 days horizon California Bond is expected to generate 5.28 times less return on investment than Us Small. But when comparing it to its historical volatility, California Bond Fund is 4.68 times less risky than Us Small. It trades about 0.21 of its potential returns per unit of risk. Us Small Cap is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 2,891 in Us Small Cap on August 29, 2024 and sell it today you would earn a total of 238.00 from holding Us Small Cap or generate 8.23% 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. Us Small Cap
Performance |
| Timeline |
| California Bond |
| Us Small Cap |
California Bond and Us Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Bond and Us Small
The main advantage of trading using opposite California Bond and Us Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Bond position performs unexpectedly, Us Small 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 Small will offset losses from the drop in Us Small's long position.| California Bond vs. Maryland Short Term Tax Free | California Bond vs. Angel Oak Ultrashort | California Bond vs. Barings Active Short | California Bond vs. Touchstone Ultra Short |
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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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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