Correlation Between California Municipal and Dunham Porategovernment
Can any of the company-specific risk be diversified away by investing in both California Municipal and Dunham Porategovernment 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 Dunham Porategovernment 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 Dunham Porategovernment Bond, you can compare the effects of market volatilities on California Municipal and Dunham Porategovernment 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 Dunham Porategovernment. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Municipal and Dunham Porategovernment.
Diversification Opportunities for California Municipal and Dunham Porategovernment
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between California and Dunham is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding California Municipal Portfolio and Dunham Porategovernment Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dunham Porategovernment 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 Dunham Porategovernment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dunham Porategovernment has no effect on the direction of California Municipal i.e., California Municipal and Dunham Porategovernment go up and down completely randomly.
Pair Corralation between California Municipal and Dunham Porategovernment
Assuming the 90 days horizon California Municipal is expected to generate 1.66 times less return on investment than Dunham Porategovernment. But when comparing it to its historical volatility, California Municipal Portfolio is 2.55 times less risky than Dunham Porategovernment. It trades about 0.2 of its potential returns per unit of risk. Dunham Porategovernment Bond is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,236 in Dunham Porategovernment Bond on May 7, 2025 and sell it today you would earn a total of 24.00 from holding Dunham Porategovernment Bond or generate 1.94% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
California Municipal Portfolio vs. Dunham Porategovernment Bond
Performance |
Timeline |
California Municipal |
Dunham Porategovernment |
California Municipal and Dunham Porategovernment Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with California Municipal and Dunham Porategovernment
The main advantage of trading using opposite California Municipal and Dunham Porategovernment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Municipal position performs unexpectedly, Dunham Porategovernment 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 Dunham Porategovernment will offset losses from the drop in Dunham Porategovernment's long position.California Municipal vs. Aqr Large Cap | California Municipal vs. Qs Large Cap | California Municipal vs. Jhancock Disciplined Value | California Municipal vs. Fidelity Large Cap |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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