Correlation Between California Intermediate and Ginnie Mae

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

By analyzing existing cross correlation between California Intermediate Term Tax Free and Ginnie Mae Fund, you can compare the effects of market volatilities on California Intermediate and Ginnie Mae 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 Intermediate with a short position of Ginnie Mae. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Intermediate and Ginnie Mae.

Diversification Opportunities for California Intermediate and Ginnie Mae

0.85

Correlation Coefficient

California Intermediate  Ginnie Mae

Very poor diversification

The 3 months correlation between California and Ginnie is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding California Intermediate Term T and Ginnie Mae Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ginnie Mae Fund and California Intermediate 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 Intermediate Term Tax Free are associated (or correlated) with Ginnie Mae. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ginnie Mae Fund has no effect on the direction of California Intermediate i.e., California Intermediate and Ginnie Mae go up and down completely randomly.

Pair Corralation between California Intermediate and Ginnie Mae

Assuming the 90 days horizon California Intermediate is expected to generate 1.4 times less return on investment than Ginnie Mae. But when comparing it to its historical volatility, California Intermediate Term Tax Free is 3.21 times less risky than Ginnie Mae. It trades about 0.15 of its potential returns per unit of risk. Ginnie Mae Fund is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  847.00  in Ginnie Mae Fund on February 21, 2024 and sell it today you would earn a total of  31.00  from holding Ginnie Mae Fund or generate 3.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.19%
Values	Daily Returns

California Intermediate Term T  vs.  Ginnie Mae Fund

California Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days California Intermediate Term Tax Free has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, California Intermediate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ginnie Mae Fund

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ginnie Mae Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Ginnie Mae 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 Intermediate and Ginnie Mae

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

The idea behind California Intermediate Term Tax Free and Ginnie Mae Fund 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.