Correlation Between California Bond and Sit Minnesota
Can any of the company-specific risk be diversified away by investing in both California Bond and Sit Minnesota 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 Sit Minnesota 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 Sit Minnesota Tax Free, you can compare the effects of market volatilities on California Bond and Sit Minnesota 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 Sit Minnesota. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Bond and Sit Minnesota.
Diversification Opportunities for California Bond and Sit Minnesota
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between California and Sit is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and Sit Minnesota Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sit Minnesota Tax 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 Sit Minnesota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sit Minnesota Tax has no effect on the direction of California Bond i.e., California Bond and Sit Minnesota go up and down completely randomly.
Pair Corralation between California Bond and Sit Minnesota
Assuming the 90 days horizon California Bond is expected to generate 1.36 times less return on investment than Sit Minnesota. But when comparing it to its historical volatility, California Bond Fund is 1.06 times less risky than Sit Minnesota. It trades about 0.1 of its potential returns per unit of risk. Sit Minnesota Tax Free is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 926.00 in Sit Minnesota Tax Free on September 3, 2024 and sell it today you would earn a total of 41.00 from holding Sit Minnesota Tax Free or generate 4.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
California Bond Fund vs. Sit Minnesota Tax Free
Performance |
| Timeline |
| California Bond |
| Sit Minnesota Tax |
California Bond and Sit Minnesota Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Bond and Sit Minnesota
The main advantage of trading using opposite California Bond and Sit Minnesota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Bond position performs unexpectedly, Sit Minnesota 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 Sit Minnesota will offset losses from the drop in Sit Minnesota'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 |
| Sit Minnesota vs. T Rowe Price | Sit Minnesota vs. Hood River New | Sit Minnesota vs. T Rowe Price | Sit Minnesota vs. Franklin Lifesmart 2050 |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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