Correlation Between Stet California and Us Government

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

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

Diversification Opportunities for Stet California and Us Government

0.6

Correlation Coefficient

Stet California  Us Government

Poor diversification

The 3 months correlation between Stet and USGFX is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Stet California Municipal and Us Government Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Government Securities and Stet California 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 Stet California Municipal are associated (or correlated) with Us Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Government Securities has no effect on the direction of Stet California i.e., Stet California and Us Government go up and down completely randomly.

Pair Corralation between Stet California and Us Government

Assuming the 90 days horizon Stet California Municipal is expected to under-perform the Us Government. But the mutual fund apears to be less risky and, when comparing its historical volatility, Stet California Municipal is 1.59 times less risky than Us Government. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Us Government Securities is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,163  in Us Government Securities on December 28, 2024 and sell it today you would earn a total of  30.00  from holding Us Government Securities or generate 2.58% return on investment over 90 days.

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

Stet California Municipal  vs.  Us Government Securities

Stet California Municipal

Risk-Adjusted Performance

Very Weak

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

Us Government Securities

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Us Government Securities are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Us Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Stet California and Us Government

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

The idea behind Stet California Municipal and Us Government Securities 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.