Correlation Between Litman Gregory and California High-yield
Can any of the company-specific risk be diversified away by investing in both Litman Gregory and California High-yield 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 Litman Gregory and California High-yield into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Litman Gregory Masters and California High Yield Municipal, you can compare the effects of market volatilities on Litman Gregory and California High-yield 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 Litman Gregory with a short position of California High-yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Litman Gregory and California High-yield.
Diversification Opportunities for Litman Gregory and California High-yield
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Litman and California is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Litman Gregory Masters and California High Yield Municipa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California High Yield and Litman Gregory 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 Litman Gregory Masters are associated (or correlated) with California High-yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California High Yield has no effect on the direction of Litman Gregory i.e., Litman Gregory and California High-yield go up and down completely randomly.
Pair Corralation between Litman Gregory and California High-yield
Assuming the 90 days horizon Litman Gregory is expected to generate 3.12 times less return on investment than California High-yield. In addition to that, Litman Gregory is 4.23 times more volatile than California High Yield Municipal. It trades about 0.03 of its total potential returns per unit of risk. California High Yield Municipal is currently generating about 0.41 per unit of volatility. If you would invest 921.00 in California High Yield Municipal on August 27, 2025 and sell it today you would earn a total of 46.00 from holding California High Yield Municipal or generate 4.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Litman Gregory Masters vs. California High Yield Municipa
Performance |
| Timeline |
| Litman Gregory Masters |
| California High Yield |
Litman Gregory and California High-yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Litman Gregory and California High-yield
The main advantage of trading using opposite Litman Gregory and California High-yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Litman Gregory position performs unexpectedly, California High-yield 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 California High-yield will offset losses from the drop in California High-yield's long position.| Litman Gregory vs. John Hancock High | Litman Gregory vs. Msift High Yield | Litman Gregory vs. Ab High Income | Litman Gregory vs. Alpine High Yield |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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