Correlation Between California Bond and Short Term
Can any of the company-specific risk be diversified away by investing in both California Bond and Short Term 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 Term 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 Term Government Fund, you can compare the effects of market volatilities on California Bond and Short Term 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 Term. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Bond and Short Term.
Diversification Opportunities for California Bond and Short Term
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between California and Short is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and Short Term Government Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term Government 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 Term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Term Government has no effect on the direction of California Bond i.e., California Bond and Short Term go up and down completely randomly.
Pair Corralation between California Bond and Short Term
Assuming the 90 days horizon California Bond Fund is expected to under-perform the Short Term. In addition to that, California Bond is 3.14 times more volatile than Short Term Government Fund. It trades about -0.34 of its total potential returns per unit of risk. Short Term Government Fund is currently generating about -0.13 per unit of volatility. If you would invest 895.00 in Short Term Government Fund on October 9, 2024 and sell it today you would lose (2.00) from holding Short Term Government Fund or give up 0.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
California Bond Fund vs. Short Term Government Fund
Performance |
| Timeline |
| California Bond |
| Short Term Government |
California Bond and Short Term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Bond and Short Term
The main advantage of trading using opposite California Bond and Short Term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Bond position performs unexpectedly, Short Term 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 Term will offset losses from the drop in Short Term's long position.| California Bond vs. Blrc Sgy Mnp | California Bond vs. Artisan High Income | California Bond vs. Versatile Bond Portfolio | California Bond vs. Siit High Yield |
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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