Correlation Between Us Government and California Municipal
Can any of the company-specific risk be diversified away by investing in both Us Government and California Municipal 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 Us Government and California Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Us Government Securities and California Municipal Portfolio, you can compare the effects of market volatilities on Us Government and California Municipal 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 Us Government with a short position of California Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Government and California Municipal.
Diversification Opportunities for Us Government and California Municipal
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between RGVCX and California is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Securities and California Municipal Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Municipal and Us Government 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 Us Government Securities are associated (or correlated) with California Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Municipal has no effect on the direction of Us Government i.e., Us Government and California Municipal go up and down completely randomly.
Pair Corralation between Us Government and California Municipal
Assuming the 90 days horizon Us Government Securities is expected to generate 3.77 times more return on investment than California Municipal. However, Us Government is 3.77 times more volatile than California Municipal Portfolio. It trades about 0.1 of its potential returns per unit of risk. California Municipal Portfolio is currently generating about 0.07 per unit of risk. If you would invest 1,182 in Us Government Securities on March 21, 2025 and sell it today you would earn a total of 9.00 from holding Us Government Securities or generate 0.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Us Government Securities vs. California Municipal Portfolio
Performance |
| Timeline |
| Us Government Securities |
| California Municipal |
Us Government and California Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Us Government and California Municipal
The main advantage of trading using opposite Us Government and California Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Government position performs unexpectedly, California Municipal 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 Municipal will offset losses from the drop in California Municipal's long position.| Us Government vs. Doubleline Emerging Markets | Us Government vs. Jpmorgan Trust Iv | Us Government vs. Fidelity Money Market | Us Government vs. North Capital Funds |
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 Stocks Directory module to find actively traded stocks across global markets.
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