Correlation Between Enhanced Fixed and American High-income
Can any of the company-specific risk be diversified away by investing in both Enhanced Fixed and American High-income 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 Enhanced Fixed and American High-income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enhanced Fixed Income and American High Income Municipal, you can compare the effects of market volatilities on Enhanced Fixed and American High-income 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 Enhanced Fixed with a short position of American High-income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enhanced Fixed and American High-income.
Diversification Opportunities for Enhanced Fixed and American High-income
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Enhanced and American is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Enhanced Fixed Income and American High Income Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American High Income and Enhanced Fixed 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 Enhanced Fixed Income are associated (or correlated) with American High-income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American High Income has no effect on the direction of Enhanced Fixed i.e., Enhanced Fixed and American High-income go up and down completely randomly.
Pair Corralation between Enhanced Fixed and American High-income
Assuming the 90 days horizon Enhanced Fixed Income is expected to under-perform the American High-income. In addition to that, Enhanced Fixed is 1.56 times more volatile than American High Income Municipal. It trades about -0.29 of its total potential returns per unit of risk. American High Income Municipal is currently generating about -0.33 per unit of volatility. If you would invest 1,560 in American High Income Municipal on October 11, 2024 and sell it today you would lose (28.00) from holding American High Income Municipal or give up 1.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enhanced Fixed Income vs. American High Income Municipal
Performance |
| Timeline |
| Enhanced Fixed Income |
| American High Income |
Enhanced Fixed and American High-income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enhanced Fixed and American High-income
The main advantage of trading using opposite Enhanced Fixed and American High-income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enhanced Fixed position performs unexpectedly, American High-income 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 American High-income will offset losses from the drop in American High-income's long position.| Enhanced Fixed vs. Virtus High Yield | Enhanced Fixed vs. Siit High Yield | Enhanced Fixed vs. Dunham High Yield | Enhanced Fixed vs. Msift High Yield |
| American High-income vs. Barings High Yield | American High-income vs. Millerhoward High Income | American High-income vs. Catalystsmh High Income | American High-income vs. Ab High Income |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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