Correlation Between High Yield and Diversified Bond
Can any of the company-specific risk be diversified away by investing in both High Yield and Diversified Bond 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 High Yield and Diversified Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between High Yield Fund Investor and Diversified Bond Fund, you can compare the effects of market volatilities on High Yield and Diversified Bond 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 High Yield with a short position of Diversified Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Yield and Diversified Bond.
Diversification Opportunities for High Yield and Diversified Bond
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between High and Diversified is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Fund Investor and Diversified Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diversified Bond and High Yield 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 High Yield Fund Investor are associated (or correlated) with Diversified Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diversified Bond has no effect on the direction of High Yield i.e., High Yield and Diversified Bond go up and down completely randomly.
Pair Corralation between High Yield and Diversified Bond
Assuming the 90 days horizon High Yield Fund Investor is expected to generate 0.45 times more return on investment than Diversified Bond. However, High Yield Fund Investor is 2.23 times less risky than Diversified Bond. It trades about 0.14 of its potential returns per unit of risk. Diversified Bond Fund is currently generating about -0.03 per unit of risk. If you would invest 509.00 in High Yield Fund Investor on August 28, 2024 and sell it today you would earn a total of 2.00 from holding High Yield Fund Investor or generate 0.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
High Yield Fund Investor vs. Diversified Bond Fund
Performance |
| Timeline |
| High Yield Fund |
| Diversified Bond |
High Yield and Diversified Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with High Yield and Diversified Bond
The main advantage of trading using opposite High Yield and Diversified Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High Yield position performs unexpectedly, Diversified Bond 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 Diversified Bond will offset losses from the drop in Diversified Bond's long position.| High Yield vs. High Yield Municipal Fund | High Yield vs. Diversified Bond Fund | High Yield vs. Ginnie Mae Fund | High Yield vs. Utilities Fund Investor |
| Diversified Bond vs. Mid Cap Value | Diversified Bond vs. Equity Growth Fund | Diversified Bond vs. Income Growth Fund | Diversified Bond vs. Emerging Markets Fund |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
Other Complementary Tools
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities |