Correlation Between California Municipal and Ab Discovery

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

By analyzing existing cross correlation between California Municipal Portfolio and Ab Discovery Growth, you can compare the effects of market volatilities on California Municipal and Ab Discovery 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 Municipal with a short position of Ab Discovery. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Municipal and Ab Discovery.

Diversification Opportunities for California Municipal and Ab Discovery

0.58

Correlation Coefficient

California Municipal  Ab Discovery

Very weak diversification

The 3 months correlation between California and CHCIX is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding California Municipal Portfolio and Ab Discovery Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Discovery Growth and California Municipal 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 Municipal Portfolio are associated (or correlated) with Ab Discovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Discovery Growth has no effect on the direction of California Municipal i.e., California Municipal and Ab Discovery go up and down completely randomly.

Pair Corralation between California Municipal and Ab Discovery

Assuming the 90 days horizon California Municipal Portfolio is expected to generate 10.49 times more return on investment than Ab Discovery. However, California Municipal is 10.49 times more volatile than Ab Discovery Growth. It trades about 0.15 of its potential returns per unit of risk. Ab Discovery Growth is currently generating about 0.12 per unit of risk. If you would invest  1,379  in California Municipal Portfolio on August 4, 2025 and sell it today you would earn a total of  1,141  from holding California Municipal Portfolio or generate 82.74% return on investment over 90 days.

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

California Municipal Portfolio  vs.  Ab Discovery Growth

California Municipal

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in California Municipal Portfolio are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, California Municipal showed solid returns over the last few months and may actually be approaching a breakup point.

Ab Discovery Growth

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Discovery Growth are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Ab Discovery 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 Municipal and Ab Discovery

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

The idea behind California Municipal Portfolio and Ab Discovery Growth 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.