Correlation Between California Tax and Ab Global

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

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

Diversification Opportunities for California Tax and Ab Global

0.69

Correlation Coefficient

California Tax  Ab Global

Poor diversification

The 3 months correlation between California and CBSYX is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding California Tax Free Income and Ab Global Risk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Global Risk and California Tax 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 Tax Free Income are associated (or correlated) with Ab Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Global Risk has no effect on the direction of California Tax i.e., California Tax and Ab Global go up and down completely randomly.

Pair Corralation between California Tax and Ab Global

Assuming the 90 days horizon California Tax is expected to generate 4.16 times less return on investment than Ab Global. But when comparing it to its historical volatility, California Tax Free Income is 2.03 times less risky than Ab Global. It trades about 0.03 of its potential returns per unit of risk. Ab Global Risk is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,782  in Ab Global Risk on September 12, 2024 and sell it today you would earn a total of  28.00  from holding Ab Global Risk or generate 1.57% return on investment over 90 days.

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

California Tax Free Income  vs.  Ab Global Risk

California Tax Free

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in California Tax Free Income are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, California Tax is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ab Global Risk

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Global Risk are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ab Global 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 Tax and Ab Global

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

The idea behind California Tax Free Income and Ab Global Risk 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.