Correlation Between California High and Copeland Risk

Can any of the company-specific risk be diversified away by investing in both California High and Copeland Risk 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 and Copeland Risk 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 Copeland Risk Managed, you can compare the effects of market volatilities on California High and Copeland Risk 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 with a short position of Copeland Risk. Check out your portfolio center. Please also check ongoing floating volatility patterns of California High and Copeland Risk.

Diversification Opportunities for California High and Copeland Risk

0.01

Correlation Coefficient

California High  Copeland Risk

Significant diversification

The 3 months correlation between California and Copeland is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding California High Yield Municipa and Copeland Risk Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copeland Risk Managed and California High 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 Copeland Risk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copeland Risk Managed has no effect on the direction of California High i.e., California High and Copeland Risk go up and down completely randomly.

Pair Corralation between California High and Copeland Risk

Assuming the 90 days horizon California High is expected to generate 1.06 times less return on investment than Copeland Risk. But when comparing it to its historical volatility, California High Yield Municipal is 3.73 times less risky than Copeland Risk. It trades about 0.07 of its potential returns per unit of risk. Copeland Risk Managed is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,042  in Copeland Risk Managed on September 20, 2024 and sell it today you would earn a total of  86.00  from holding Copeland Risk Managed or generate 8.25% return on investment over 90 days.

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

California High Yield Municipa  vs.  Copeland Risk Managed

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 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Copeland Risk Managed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Copeland Risk Managed 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 basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with California High and Copeland Risk

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

The idea behind California High Yield Municipal and Copeland Risk Managed 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.