Correlation Between California High-yield and Ab Sustainable

Can any of the company-specific risk be diversified away by investing in both California High-yield and Ab Sustainable 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 High-yield and Ab Sustainable into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between California High Yield Municipal and Ab Sustainable Global, you can compare the effects of market volatilities on California High-yield and Ab Sustainable 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 High-yield with a short position of Ab Sustainable. Check out your portfolio center. Please also check ongoing floating volatility patterns of California High-yield and Ab Sustainable.

Diversification Opportunities for California High-yield and Ab Sustainable

0.45

Correlation Coefficient

California High-yield  Ab Sustainable

Very weak diversification

The 3 months correlation between California and ALTFX is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding California High Yield Municipa and Ab Sustainable Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Sustainable Global and California High-yield 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 High Yield Municipal are associated (or correlated) with Ab Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Sustainable Global has no effect on the direction of California High-yield i.e., California High-yield and Ab Sustainable go up and down completely randomly.

Pair Corralation between California High-yield and Ab Sustainable

Assuming the 90 days horizon California High-yield is expected to generate 1.39 times less return on investment than Ab Sustainable. But when comparing it to its historical volatility, California High Yield Municipal is 3.22 times less risky than Ab Sustainable. It trades about 0.05 of its potential returns per unit of risk. Ab Sustainable Global is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  13,261  in Ab Sustainable Global on October 4, 2024 and sell it today you would earn a total of  1,056  from holding Ab Sustainable Global or generate 7.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

California High Yield Municipa  vs.  Ab Sustainable Global

California High Yield

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ab Sustainable Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ab Sustainable Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with California High-yield and Ab Sustainable

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

The idea behind California High Yield Municipal and Ab Sustainable Global 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.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.