Correlation Between California Bond and Ab Global

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

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

Diversification Opportunities for California Bond and Ab Global

0.65

Correlation Coefficient

California Bond  Ab Global

Poor diversification

The 3 months correlation between California and ANAGX is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and Ab Global Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Global Bond and California Bond 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 Bond Fund are associated (or correlated) with Ab Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Global Bond has no effect on the direction of California Bond i.e., California Bond and Ab Global go up and down completely randomly.

Pair Corralation between California Bond and Ab Global

Assuming the 90 days horizon California Bond is expected to generate 104.5 times less return on investment than Ab Global. But when comparing it to its historical volatility, California Bond Fund is 1.11 times less risky than Ab Global. It trades about 0.0 of its potential returns per unit of risk. Ab Global Bond is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  688.00  in Ab Global Bond on September 19, 2024 and sell it today you would earn a total of  3.00  from holding Ab Global Bond or generate 0.44% return on investment over 90 days.

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

California Bond Fund  vs.  Ab Global Bond

California Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ab Global Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ab Global Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Ab Global 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 Bond and Ab Global

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

The idea behind California Bond Fund and Ab Global Bond 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.