Correlation Between California High-yield and Eaton Vance
Can any of the company-specific risk be diversified away by investing in both California High-yield and Eaton Vance 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 Eaton Vance 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 Eaton Vance Municipal, you can compare the effects of market volatilities on California High-yield and Eaton Vance 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 Eaton Vance. Check out your portfolio center. Please also check ongoing floating volatility patterns of California High-yield and Eaton Vance.
Diversification Opportunities for California High-yield and Eaton Vance
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between California and Eaton is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding California High Yield Municipa and Eaton Vance Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton Vance Municipal 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 Eaton Vance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton Vance Municipal has no effect on the direction of California High-yield i.e., California High-yield and Eaton Vance go up and down completely randomly.
Pair Corralation between California High-yield and Eaton Vance
Assuming the 90 days horizon California High Yield Municipal is expected to under-perform the Eaton Vance. But the mutual fund apears to be less risky and, when comparing its historical volatility, California High Yield Municipal is 1.02 times less risky than Eaton Vance. The mutual fund trades about -0.41 of its potential returns per unit of risk. The Eaton Vance Municipal is currently generating about -0.34 of returns per unit of risk over similar time horizon. If you would invest 1,156 in Eaton Vance Municipal on October 7, 2024 and sell it today you would lose (21.00) from holding Eaton Vance Municipal or give up 1.82% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
California High Yield Municipa vs. Eaton Vance Municipal
Performance |
Timeline |
California High Yield |
Eaton Vance Municipal |
California High-yield and Eaton Vance Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with California High-yield and Eaton Vance
The main advantage of trading using opposite California High-yield and Eaton Vance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California High-yield position performs unexpectedly, Eaton Vance 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 Eaton Vance will offset losses from the drop in Eaton Vance's long position.California High-yield vs. Qs Large Cap | California High-yield vs. Eic Value Fund | California High-yield vs. Commodities Strategy Fund | California High-yield vs. Predex Funds |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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