Correlation Between High Yield and Strategic Income
Can any of the company-specific risk be diversified away by investing in both High Yield and Strategic 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 Strategic 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 Strategic Income Fund, you can compare the effects of market volatilities on High Yield and Strategic 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 Strategic Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Yield and Strategic Income.
Diversification Opportunities for High Yield and Strategic Income
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between High and Strategic is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund and Strategic Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Income 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 Strategic Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Income has no effect on the direction of High Yield i.e., High Yield and Strategic Income go up and down completely randomly.
Pair Corralation between High Yield and Strategic Income
Assuming the 90 days horizon High Yield Municipal Fund is expected to generate 0.71 times more return on investment than Strategic Income. However, High Yield Municipal Fund is 1.42 times less risky than Strategic Income. It trades about 0.51 of its potential returns per unit of risk. Strategic Income Fund is currently generating about 0.2 per unit of risk. If you would invest 893.00 in High Yield Municipal Fund on September 12, 2024 and sell it today you would earn a total of 12.00 from holding High Yield Municipal Fund or generate 1.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
High Yield Municipal Fund vs. Strategic Income Fund
Performance |
| Timeline |
| High Yield Municipal |
| Strategic Income |
High Yield and Strategic Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with High Yield and Strategic Income
The main advantage of trading using opposite High Yield and Strategic Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High Yield position performs unexpectedly, Strategic 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 Strategic Income will offset losses from the drop in Strategic 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 |
| Strategic Income vs. Legg Mason Global | Strategic Income vs. Mirova Global Green | Strategic Income vs. Qs Global Equity | Strategic Income vs. Artisan Global Unconstrained |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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