Correlation Between Short Term and California Intermediate
Can any of the company-specific risk be diversified away by investing in both Short Term and California Intermediate 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 Short Term and California Intermediate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Short Term Fund C and California Intermediate Municipal, you can compare the effects of market volatilities on Short Term and California Intermediate 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 Short Term with a short position of California Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Term and California Intermediate.
Diversification Opportunities for Short Term and California Intermediate
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Short and California is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Short Term Fund C and California Intermediate Munici in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Intermediate and Short Term 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 Short Term Fund C are associated (or correlated) with California Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Intermediate has no effect on the direction of Short Term i.e., Short Term and California Intermediate go up and down completely randomly.
Pair Corralation between Short Term and California Intermediate
Assuming the 90 days horizon Short Term is expected to generate 1.82 times less return on investment than California Intermediate. But when comparing it to its historical volatility, Short Term Fund C is 1.66 times less risky than California Intermediate. It trades about 0.16 of its potential returns per unit of risk. California Intermediate Municipal is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 907.00 in California Intermediate Municipal on June 1, 2025 and sell it today you would earn a total of 14.00 from holding California Intermediate Municipal or generate 1.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.44% |
| Values | Daily Returns |
Short Term Fund C vs. California Intermediate Munici
Performance |
| Timeline |
| Short Term Fund |
| California Intermediate |
Short Term and California Intermediate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Short Term and California Intermediate
The main advantage of trading using opposite Short Term and California Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short Term position performs unexpectedly, California Intermediate 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 Intermediate will offset losses from the drop in California Intermediate's long position.| Short Term vs. Pimco Rae Worldwide | Short Term vs. Pimco Rae Worldwide | Short Term vs. Pimco Rae Worldwide | Short Term vs. Pimco Rae Worldwide |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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