Correlation Between California Bond and Short-term Government
Can any of the company-specific risk be diversified away by investing in both California Bond and Short-term 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 Short-term 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 Short Term Government Fund, you can compare the effects of market volatilities on California Bond and Short-term 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 Short-term Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Bond and Short-term Government.
Diversification Opportunities for California Bond and Short-term Government
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between California and Short-term is 0.65. 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 Government. 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 Government go up and down completely randomly.
Pair Corralation between California Bond and Short-term Government
Assuming the 90 days horizon California Bond Fund is expected to generate 3.02 times more return on investment than Short-term Government. However, California Bond is 3.02 times more volatile than Short Term Government Fund. It trades about 0.14 of its potential returns per unit of risk. Short Term Government Fund is currently generating about -0.09 per unit of risk. If you would invest 1,033 in California Bond Fund on August 26, 2024 and sell it today you would earn a total of 11.00 from holding California Bond Fund or generate 1.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| 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 Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Bond and Short-term Government
The main advantage of trading using opposite California Bond and Short-term Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Bond position performs unexpectedly, Short-term 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 Short-term Government will offset losses from the drop in Short-term Government's long position.| California Bond vs. Artisan Emerging Markets | California Bond vs. Siit Emerging Markets | California Bond vs. T Rowe Price | California Bond vs. Origin Emerging Markets |
| Short-term Government vs. Maryland Tax Free Bond | Short-term Government vs. Pace Municipal Fixed | Short-term Government vs. California Bond Fund | Short-term Government vs. Nuveen All American Municipal |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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