Correlation Between California Bond and Artisan Thematic

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

Diversification Opportunities for California Bond and Artisan Thematic

0.22

Correlation Coefficient

California Bond  Artisan Thematic

Modest diversification

The 3 months correlation between California and Artisan is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and Artisan Thematic Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Artisan Thematic 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 Thematic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Artisan Thematic has no effect on the direction of California Bond i.e., California Bond and Artisan Thematic go up and down completely randomly.

Pair Corralation between California Bond and Artisan Thematic

Assuming the 90 days horizon California Bond Fund is expected to generate 0.21 times more return on investment than Artisan Thematic. However, California Bond Fund is 4.72 times less risky than Artisan Thematic. It trades about -0.04 of its potential returns per unit of risk. Artisan Thematic Fund is currently generating about -0.02 per unit of risk. If you would invest  1,022  in California Bond Fund on December 30, 2024 and sell it today you would lose (7.00) from holding California Bond Fund or give up 0.68% 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 Thematic Fund

California Bond

Risk-Adjusted Performance

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 Thematic

Risk-Adjusted Performance

Very Weak

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

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

The idea behind California Bond Fund and Artisan Thematic Fund 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.