Correlation Between California Municipal and Eaton Vance

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

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

Diversification Opportunities for California Municipal and Eaton Vance

0.98

Correlation Coefficient

California Municipal  Eaton Vance

Almost no diversification

The 3 months correlation between California and Eaton is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding California Municipal Fund and Eaton Vance California in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton Vance California and California Municipal 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 Municipal Fund are associated (or correlated) with Eaton Vance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton Vance California has no effect on the direction of California Municipal i.e., California Municipal and Eaton Vance go up and down completely randomly.

Pair Corralation between California Municipal and Eaton Vance

Assuming the 90 days horizon California Municipal Fund is expected to generate 0.75 times more return on investment than Eaton Vance. However, California Municipal Fund is 1.33 times less risky than Eaton Vance. It trades about -0.31 of its potential returns per unit of risk. Eaton Vance California is currently generating about -0.35 per unit of risk. If you would invest  993.00  in California Municipal Fund on October 13, 2024 and sell it today you would lose (12.00) from holding California Municipal Fund or give up 1.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.0%
Values	Daily Returns

California Municipal Fund  vs.  Eaton Vance California

California Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Eaton Vance California

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eaton Vance California has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Eaton Vance 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 Municipal and Eaton Vance

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

The idea behind California Municipal Fund and Eaton Vance California 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.