Correlation Between California Bond and Short Precious

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

Diversification Opportunities for California Bond and Short Precious

0.03

Correlation Coefficient

California Bond  Short Precious

Significant diversification

The 3 months correlation between California and Short is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and Short Precious Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Precious Metals 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 Short Precious. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Precious Metals has no effect on the direction of California Bond i.e., California Bond and Short Precious go up and down completely randomly.

Pair Corralation between California Bond and Short Precious

Assuming the 90 days horizon California Bond Fund is expected to generate 0.17 times more return on investment than Short Precious. However, California Bond Fund is 5.73 times less risky than Short Precious. It trades about -0.04 of its potential returns per unit of risk. Short Precious Metals is currently generating about -0.22 per unit of risk. If you would invest  1,027  in California Bond Fund on October 23, 2024 and sell it today you would lose (2.00) from holding California Bond Fund or give up 0.19% of portfolio value over 90 days.

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

California Bond Fund  vs.  Short Precious Metals

California Bond

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in California Bond Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. 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.

Short Precious Metals

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Short Precious Metals are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Short Precious showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with California Bond and Short Precious

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

The idea behind California Bond Fund and Short Precious Metals 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.