Correlation Between Brf Clf and California Intermediate

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

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

Diversification Opportunities for Brf Clf and California Intermediate

0.97

Correlation Coefficient

Brf Clf  California Intermediate

Almost no diversification

The 3 months correlation between Brf and California is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Brf Clf Mpl and California Intermediate Term T in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Intermediate and Brf Clf 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 Brf Clf Mpl are associated (or correlated) with California Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Intermediate has no effect on the direction of Brf Clf i.e., Brf Clf and California Intermediate go up and down completely randomly.

Pair Corralation between Brf Clf and California Intermediate

Assuming the 90 days horizon Brf Clf Mpl is expected to generate about the same return on investment as California Intermediate Term Tax Free. But, Brf Clf Mpl is 1.16 times less risky than California Intermediate. It trades about -0.36 of its potential returns per unit of risk. California Intermediate Term Tax Free is currently generating about -0.32 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

Brf Clf Mpl  vs.  California Intermediate Term T

Brf Clf Mpl

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Brf Clf and California Intermediate

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

The idea behind Brf Clf Mpl and California Intermediate Term Tax Free 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.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.