Correlation Between California Bond and Vanguard High-yield
Can any of the company-specific risk be diversified away by investing in both California Bond and Vanguard High-yield 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 Vanguard High-yield 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 Vanguard High Yield Tax Exempt, you can compare the effects of market volatilities on California Bond and Vanguard High-yield 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 Vanguard High-yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Bond and Vanguard High-yield.
Diversification Opportunities for California Bond and Vanguard High-yield
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between California and Vanguard is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and Vanguard High Yield Tax Exempt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard High Yield 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 Vanguard High-yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard High Yield has no effect on the direction of California Bond i.e., California Bond and Vanguard High-yield go up and down completely randomly.
Pair Corralation between California Bond and Vanguard High-yield
Assuming the 90 days horizon California Bond is expected to generate 1.35 times less return on investment than Vanguard High-yield. In addition to that, California Bond is 1.02 times more volatile than Vanguard High Yield Tax Exempt. It trades about 0.1 of its total potential returns per unit of risk. Vanguard High Yield Tax Exempt is currently generating about 0.14 per unit of volatility. If you would invest 1,063 in Vanguard High Yield Tax Exempt on November 27, 2024 and sell it today you would earn a total of 7.00 from holding Vanguard High Yield Tax Exempt or generate 0.66% 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. Vanguard High Yield Tax Exempt
Performance |
| Timeline |
| California Bond |
| Vanguard High Yield |
California Bond and Vanguard High-yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Bond and Vanguard High-yield
The main advantage of trading using opposite California Bond and Vanguard High-yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Bond position performs unexpectedly, Vanguard High-yield 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 Vanguard High-yield will offset losses from the drop in Vanguard High-yield's long position.| California Bond vs. Federated Government Income | California Bond vs. Us Government Securities | California Bond vs. Dunham Porategovernment Bond | California Bond vs. John Hancock Government |
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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