Correlation Between California High-yield and Tax-managed

Can any of the company-specific risk be diversified away by investing in both California High-yield and Tax-managed 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 Tax-managed 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 Tax Managed Large Cap, you can compare the effects of market volatilities on California High-yield and Tax-managed 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 Tax-managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of California High-yield and Tax-managed.

Diversification Opportunities for California High-yield and Tax-managed

0.43

Correlation Coefficient

California High-yield  Tax-managed

Very weak diversification

The 3 months correlation between California and Tax-managed is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding California High Yield Municipa and Tax Managed Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Managed Large 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 Tax-managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Managed Large has no effect on the direction of California High-yield i.e., California High-yield and Tax-managed go up and down completely randomly.

Pair Corralation between California High-yield and Tax-managed

Assuming the 90 days horizon California High Yield Municipal is expected to generate 0.32 times more return on investment than Tax-managed. However, California High Yield Municipal is 3.16 times less risky than Tax-managed. It trades about -0.07 of its potential returns per unit of risk. Tax Managed Large Cap is currently generating about -0.06 per unit of risk. If you would invest  991.00  in California High Yield Municipal on December 4, 2024 and sell it today you would lose (10.00) from holding California High Yield Municipal or give up 1.01% of portfolio value over 90 days.

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

California High Yield Municipa  vs.  Tax Managed Large Cap

California High Yield

Risk-Adjusted Performance

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.

Tax Managed Large

Risk-Adjusted Performance

Very Weak

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

Pair Trading with California High-yield and Tax-managed

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

The idea behind California High Yield Municipal and Tax Managed Large Cap 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.