Correlation Between California Tax-free and Shelton Green

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

Diversification Opportunities for California Tax-free and Shelton Green

0.54

Correlation Coefficient

California Tax-free  Shelton Green

Very weak diversification

The 3 months correlation between California and Shelton is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding California Tax Free Income and Shelton Green Alpha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shelton Green Alpha and California Tax-free 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 Shelton Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shelton Green Alpha has no effect on the direction of California Tax-free i.e., California Tax-free and Shelton Green go up and down completely randomly.

Pair Corralation between California Tax-free and Shelton Green

Assuming the 90 days horizon California Tax Free Income is expected to generate 0.16 times more return on investment than Shelton Green. However, California Tax Free Income is 6.43 times less risky than Shelton Green. It trades about 0.03 of its potential returns per unit of risk. Shelton Green Alpha is currently generating about -0.01 per unit of risk. If you would invest  1,054  in California Tax Free Income on December 4, 2024 and sell it today you would earn a total of  11.00  from holding California Tax Free Income or generate 1.04% return on investment over 90 days.

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

California Tax Free Income  vs.  Shelton Green Alpha

California Tax Free

Risk-Adjusted Performance

Very Weak

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

Shelton Green Alpha

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shelton Green Alpha has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with California Tax-free and Shelton Green

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

The idea behind California Tax Free Income and Shelton Green Alpha 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.