Correlation Between High Yield and High Income
Can any of the company-specific risk be diversified away by investing in both High Yield and 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 High Yield and High Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between High Yield Municipal Fund and High Income Fund, you can compare the effects of market volatilities on High Yield and 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 High Yield with a short position of High Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Yield and High Income.
Diversification Opportunities for High Yield and High Income
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between High and High is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund and High Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Income 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 Municipal Fund are associated (or correlated) with 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 High Income Fund has no effect on the direction of High Yield i.e., High Yield and High Income go up and down completely randomly.
Pair Corralation between High Yield and High Income
Assuming the 90 days horizon High Yield is expected to generate 1.13 times less return on investment than High Income. In addition to that, High Yield is 1.21 times more volatile than High Income Fund. It trades about 0.12 of its total potential returns per unit of risk. High Income Fund is currently generating about 0.16 per unit of volatility. If you would invest 806.00 in High Income Fund on September 14, 2024 and sell it today you would earn a total of 69.00 from holding High Income Fund or generate 8.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
High Yield Municipal Fund vs. High Income Fund
Performance |
| Timeline |
| High Yield Municipal |
| High Income Fund |
High Yield and High Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with High Yield and High Income
The main advantage of trading using opposite High Yield and High Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High Yield position performs unexpectedly, 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 High Income will offset losses from the drop in High Income's long position.| High Yield vs. High Yield Fund Investor | High Yield vs. Intermediate Term Tax Free Bond | High Yield vs. California High Yield Municipal | High Yield vs. T Rowe Price |
| High Income vs. High Yield Municipal Fund | High Income vs. Diversified Bond Fund | High Income vs. Ginnie Mae Fund | High Income vs. Utilities Fund Investor |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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