Correlation Between California Bond and Multi Manager

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

By analyzing existing cross correlation between California Bond Fund and Multi Manager Directional Alternative, you can compare the effects of market volatilities on California Bond and Multi Manager 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 Bond with a short position of Multi Manager. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Bond and Multi Manager.

Diversification Opportunities for California Bond and Multi Manager

-0.14

Correlation Coefficient

California Bond  Multi Manager

Good diversification

The 3 months correlation between California and Multi is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and Multi Manager Directional Alte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Manager Direct and California Bond 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 Bond Fund are associated (or correlated) with Multi Manager. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Manager Direct has no effect on the direction of California Bond i.e., California Bond and Multi Manager go up and down completely randomly.

Pair Corralation between California Bond and Multi Manager

Assuming the 90 days horizon California Bond is expected to generate 3.13 times less return on investment than Multi Manager. But when comparing it to its historical volatility, California Bond Fund is 3.13 times less risky than Multi Manager. It trades about 0.27 of its potential returns per unit of risk. Multi Manager Directional Alternative is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  778.00  in Multi Manager Directional Alternative on August 30, 2024 and sell it today you would earn a total of  50.00  from holding Multi Manager Directional Alternative or generate 6.43% return on investment over 90 days.

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

California Bond Fund  vs.  Multi Manager Directional Alte

California Bond

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in California Bond Fund are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, California Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Multi Manager Direct

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Manager Directional Alternative are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Multi Manager may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with California Bond and Multi Manager

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

The idea behind California Bond Fund and Multi Manager Directional Alternative 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.