Correlation Between California Bond and Artisan Emerging

Can any of the company-specific risk be diversified away by investing in both California Bond and Artisan Emerging 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 Artisan Emerging 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 Artisan Emerging Markets, you can compare the effects of market volatilities on California Bond and Artisan Emerging 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 Artisan Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Bond and Artisan Emerging.

Diversification Opportunities for California Bond and Artisan Emerging

0.39

Correlation Coefficient

California Bond  Artisan Emerging

Weak diversification

The 3 months correlation between California and Artisan is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and Artisan Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Artisan Emerging Markets 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 Artisan Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Artisan Emerging Markets has no effect on the direction of California Bond i.e., California Bond and Artisan Emerging go up and down completely randomly.

Pair Corralation between California Bond and Artisan Emerging

Assuming the 90 days horizon California Bond Fund is expected to under-perform the Artisan Emerging. But the mutual fund apears to be less risky and, when comparing its historical volatility, California Bond Fund is 1.03 times less risky than Artisan Emerging. The mutual fund trades about -0.36 of its potential returns per unit of risk. The Artisan Emerging Markets is currently generating about -0.24 of returns per unit of risk over similar time horizon. If you would invest  1,031  in Artisan Emerging Markets on October 4, 2024 and sell it today you would lose (14.00) from holding Artisan Emerging Markets or give up 1.36% of portfolio value over 90 days.

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

California Bond Fund  vs.  Artisan Emerging Markets

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.

Artisan Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Artisan Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Artisan Emerging 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 Artisan Emerging

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

The idea behind California Bond Fund and Artisan Emerging Markets 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.