Correlation Between California High and Optimum Small

Can any of the company-specific risk be diversified away by investing in both California High and Optimum Small 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 High and Optimum Small into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between California High Yield Municipal and Optimum Small Mid Cap, you can compare the effects of market volatilities on California High and Optimum Small 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 High with a short position of Optimum Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of California High and Optimum Small.

Diversification Opportunities for California High and Optimum Small

0.0

Correlation Coefficient

California High  Optimum Small

Pay attention - limited upside

The 3 months correlation between California and Optimum is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding California High Yield Municipa and Optimum Small Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optimum Small Mid and California High 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 High Yield Municipal are associated (or correlated) with Optimum Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optimum Small Mid has no effect on the direction of California High i.e., California High and Optimum Small go up and down completely randomly.

Pair Corralation between California High and Optimum Small

Assuming the 90 days horizon California High is expected to generate 3.01 times less return on investment than Optimum Small. But when comparing it to its historical volatility, California High Yield Municipal is 5.26 times less risky than Optimum Small. It trades about 0.03 of its potential returns per unit of risk. Optimum Small Mid Cap is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,381  in Optimum Small Mid Cap on September 13, 2024 and sell it today you would earn a total of  9.00  from holding Optimum Small Mid Cap or generate 0.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

California High Yield Municipa  vs.  Optimum Small Mid Cap

California High Yield

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in California High Yield Municipal are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, California High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Optimum Small Mid

Risk-Adjusted Performance

1 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Optimum Small Mid Cap are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Optimum Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with California High and Optimum Small

The main advantage of trading using opposite California High and Optimum Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California High position performs unexpectedly, Optimum Small 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 Optimum Small will offset losses from the drop in Optimum Small's long position.

The idea behind California High Yield Municipal and Optimum Small Mid Cap pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.