Correlation Between High Yield and Global Bond
Can any of the company-specific risk be diversified away by investing in both High Yield and Global 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 Global 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 Global Bond Fund, you can compare the effects of market volatilities on High Yield and Global 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 Global Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Yield and Global Bond.
Diversification Opportunities for High Yield and Global Bond
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between High and Global is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Fund Investor and Global Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Bond Fund 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 Global Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Bond Fund has no effect on the direction of High Yield i.e., High Yield and Global Bond go up and down completely randomly.
Pair Corralation between High Yield and Global Bond
Assuming the 90 days horizon High Yield Fund Investor is expected to generate 0.97 times more return on investment than Global Bond. However, High Yield Fund Investor is 1.03 times less risky than Global Bond. It trades about 0.1 of its potential returns per unit of risk. Global Bond Fund is currently generating about 0.04 per unit of risk. If you would invest 441.00 in High Yield Fund Investor on August 28, 2024 and sell it today you would earn a total of 70.00 from holding High Yield Fund Investor or generate 15.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
High Yield Fund Investor vs. Global Bond Fund
Performance |
| Timeline |
| High Yield Fund |
| Global Bond Fund |
High Yield and Global Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with High Yield and Global Bond
The main advantage of trading using opposite High Yield and Global Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High Yield position performs unexpectedly, Global 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 Global Bond will offset losses from the drop in Global 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 |
| Global Bond vs. High Yield Fund Investor | Global Bond vs. Core Plus Fund | Global Bond vs. Diversified Bond Fund | Global Bond vs. Strategic Income 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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