Correlation Between California Tax-free and Sp Midcap
Can any of the company-specific risk be diversified away by investing in both California Tax-free and Sp Midcap 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 Tax-free and Sp Midcap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between California Tax Free Income and Sp Midcap Index, you can compare the effects of market volatilities on California Tax-free and Sp Midcap 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 Tax-free with a short position of Sp Midcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Tax-free and Sp Midcap.
Diversification Opportunities for California Tax-free and Sp Midcap
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between CALIFORNIA and SPMIX is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding California Tax Free Income and Sp Midcap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp Midcap Index and California Tax-free 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 Tax Free Income are associated (or correlated) with Sp Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp Midcap Index has no effect on the direction of California Tax-free i.e., California Tax-free and Sp Midcap go up and down completely randomly.
Pair Corralation between California Tax-free and Sp Midcap
Assuming the 90 days horizon California Tax-free is expected to generate 11.38 times less return on investment than Sp Midcap. But when comparing it to its historical volatility, California Tax Free Income is 10.06 times less risky than Sp Midcap. It trades about 0.26 of its potential returns per unit of risk. Sp Midcap Index is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 2,492 in Sp Midcap Index on April 7, 2025 and sell it today you would earn a total of 111.00 from holding Sp Midcap Index or generate 4.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
California Tax Free Income vs. Sp Midcap Index
Performance |
| Timeline |
| California Tax Free |
| Sp Midcap Index |
California Tax-free and Sp Midcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Tax-free and Sp Midcap
The main advantage of trading using opposite California Tax-free and Sp Midcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Tax-free position performs unexpectedly, Sp Midcap 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 Sp Midcap will offset losses from the drop in Sp Midcap's long position.| California Tax-free vs. Blackrock Health Sciences | California Tax-free vs. Alphacentric Lifesci Healthcare | California Tax-free vs. Tekla Healthcare Investors | California Tax-free vs. Schwab Health Care |
| Sp Midcap vs. Icon Information Technology | Sp Midcap vs. Global Technology Portfolio | Sp Midcap vs. Pgim Jennison Technology | Sp Midcap vs. Technology Ultrasector Profund |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets |