Correlation Between Global Gold and California Tax-free

Can any of the company-specific risk be diversified away by investing in both Global Gold and California Tax-free 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 Global Gold and California Tax-free into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global Gold Fund and California Tax Free Fund, you can compare the effects of market volatilities on Global Gold and California Tax-free 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 Global Gold with a short position of California Tax-free. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Gold and California Tax-free.

Diversification Opportunities for Global Gold and California Tax-free

0.0

Correlation Coefficient

Global Gold  California Tax-free

Pay attention - limited upside

The 3 months correlation between Global and California is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Global Gold Fund and California Tax Free Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Tax Free and Global Gold 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 Global Gold Fund are associated (or correlated) with California Tax-free. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Tax Free has no effect on the direction of Global Gold i.e., Global Gold and California Tax-free go up and down completely randomly.

Pair Corralation between Global Gold and California Tax-free

If you would invest  1,186  in Global Gold Fund on December 22, 2024 and sell it today you would earn a total of  359.00  from holding Global Gold Fund or generate 30.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.64%
Values	Daily Returns

Global Gold Fund  vs.  California Tax Free Fund

Global Gold Fund

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global Gold Fund are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Global Gold showed solid returns over the last few months and may actually be approaching a breakup point.

California Tax Free

Risk-Adjusted Performance

Weak

Over the last 90 days California Tax Free Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, California Tax-free is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global Gold and California Tax-free

The main advantage of trading using opposite Global Gold and California Tax-free positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Gold position performs unexpectedly, California Tax-free 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 California Tax-free will offset losses from the drop in California Tax-free's long position.

The idea behind Global Gold Fund and California Tax Free Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.