Correlation Between California Bond and Target Retirement
Can any of the company-specific risk be diversified away by investing in both California Bond and Target Retirement 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 Target Retirement 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 Target Retirement 2040, you can compare the effects of market volatilities on California Bond and Target Retirement 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 Target Retirement. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Bond and Target Retirement.
Diversification Opportunities for California Bond and Target Retirement
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between California and Target is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and Target Retirement 2040 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target Retirement 2040 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 Target Retirement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target Retirement 2040 has no effect on the direction of California Bond i.e., California Bond and Target Retirement go up and down completely randomly.
Pair Corralation between California Bond and Target Retirement
Assuming the 90 days horizon California Bond Fund is expected to generate 0.4 times more return on investment than Target Retirement. However, California Bond Fund is 2.5 times less risky than Target Retirement. It trades about -0.04 of its potential returns per unit of risk. Target Retirement 2040 is currently generating about -0.04 per unit of risk. If you would invest 1,046 in California Bond Fund on December 2, 2024 and sell it today you would lose (8.00) from holding California Bond Fund or give up 0.76% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
California Bond Fund vs. Target Retirement 2040
Performance |
Timeline |
California Bond |
Target Retirement 2040 |
California Bond and Target Retirement Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with California Bond and Target Retirement
The main advantage of trading using opposite California Bond and Target Retirement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Bond position performs unexpectedly, Target Retirement 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 Target Retirement will offset losses from the drop in Target Retirement's long position.California Bond vs. Cmg Ultra Short | California Bond vs. Rbc Short Duration | California Bond vs. John Hancock Variable | California Bond vs. Seix Govt Sec |
Target Retirement vs. Barings Active Short | Target Retirement vs. Nuveen North Carolina | Target Retirement vs. Scharf Global Opportunity | Target Retirement vs. Federated Government Income |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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