Correlation Between California Intermediate and Vanguard California

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

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

Diversification Opportunities for California Intermediate and Vanguard California

1.0

Correlation Coefficient

California Intermediate  Vanguard California

No risk reduction

The 3 months correlation between California and Vanguard is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding California Intermediate Term T and Vanguard California Intermedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard California and California Intermediate 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 Intermediate Term Tax Free are associated (or correlated) with Vanguard California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard California has no effect on the direction of California Intermediate i.e., California Intermediate and Vanguard California go up and down completely randomly.

Pair Corralation between California Intermediate and Vanguard California

Assuming the 90 days horizon California Intermediate Term Tax Free is expected to generate 1.02 times more return on investment than Vanguard California. However, California Intermediate is 1.02 times more volatile than Vanguard California Intermediate Term. It trades about -0.32 of its potential returns per unit of risk. Vanguard California Intermediate Term is currently generating about -0.36 per unit of risk. If you would invest  1,133  in California Intermediate Term Tax Free on October 7, 2024 and sell it today you would lose (14.00) from holding California Intermediate Term Tax Free or give up 1.24% of portfolio value over 90 days.

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

California Intermediate Term T  vs.  Vanguard California Intermedia

California Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vanguard California

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard California Intermediate Term has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Vanguard California 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 Intermediate and Vanguard California

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

The idea behind California Intermediate Term Tax Free and Vanguard California Intermediate Term 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.