Correlation Between IQ MacKay and Vanguard California

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

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

Diversification Opportunities for IQ MacKay and Vanguard California

0.94

Correlation Coefficient

IQ MacKay  Vanguard California

Almost no diversification

The 3 months correlation between MMIN and Vanguard is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding IQ MacKay Municipal and Vanguard California Tax Exempt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard California Tax and IQ MacKay 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 IQ MacKay Municipal 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 Tax has no effect on the direction of IQ MacKay i.e., IQ MacKay and Vanguard California go up and down completely randomly.

Pair Corralation between IQ MacKay and Vanguard California

Given the investment horizon of 90 days IQ MacKay Municipal is expected to under-perform the Vanguard California. In addition to that, IQ MacKay is 1.41 times more volatile than Vanguard California Tax Exempt. It trades about -0.07 of its total potential returns per unit of risk. Vanguard California Tax Exempt is currently generating about -0.08 per unit of volatility. If you would invest  9,894  in Vanguard California Tax Exempt on December 28, 2024 and sell it today you would lose (101.00) from holding Vanguard California Tax Exempt or give up 1.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

IQ MacKay Municipal  vs.  Vanguard California Tax Exempt

IQ MacKay Municipal

Risk-Adjusted Performance

Very Weak

Over the last 90 days IQ MacKay Municipal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, IQ MacKay is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Vanguard California Tax

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard California Tax Exempt has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Vanguard California is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IQ MacKay and Vanguard California

The main advantage of trading using opposite IQ MacKay and Vanguard California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IQ MacKay 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 IQ MacKay Municipal and Vanguard California Tax Exempt 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.