Correlation Between Shelton Green and California Tax-free

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

By analyzing existing cross correlation between Shelton Green Alpha and California Tax Free Income, you can compare the effects of market volatilities on Shelton Green and California Tax-free 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 Shelton Green with a short position of California Tax-free. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shelton Green and California Tax-free.

Diversification Opportunities for Shelton Green and California Tax-free

0.01

Correlation Coefficient

Shelton Green  California Tax-free

Significant diversification

The 3 months correlation between Shelton and California is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Shelton Green Alpha and California Tax Free Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Tax Free and Shelton Green 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 Shelton Green Alpha are associated (or correlated) with California Tax-free. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Tax Free has no effect on the direction of Shelton Green i.e., Shelton Green and California Tax-free go up and down completely randomly.

Pair Corralation between Shelton Green and California Tax-free

Assuming the 90 days horizon Shelton Green is expected to generate 1.02 times less return on investment than California Tax-free. In addition to that, Shelton Green is 7.9 times more volatile than California Tax Free Income. It trades about 0.01 of its total potential returns per unit of risk. California Tax Free Income is currently generating about 0.06 per unit of volatility. If you would invest  1,028  in California Tax Free Income on February 14, 2024 and sell it today you would earn a total of  36.00  from holding California Tax Free Income or generate 3.5% return on investment over 90 days.

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

Shelton Green Alpha  vs.  California Tax Free Income

Shelton Green Alpha

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shelton Green Alpha are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Shelton Green is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

California Tax Free

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Shelton Green and California Tax-free

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

The idea behind Shelton Green Alpha and California Tax Free Income 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.