Correlation Between High Yield and Sparta Capital
Can any of the company-specific risk be diversified away by investing in both High Yield and Sparta Capital 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 Sparta Capital 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 Sparta Capital, you can compare the effects of market volatilities on High Yield and Sparta Capital 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 Sparta Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Yield and Sparta Capital.
Diversification Opportunities for High Yield and Sparta Capital
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between High and Sparta is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund and Sparta Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparta Capital 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 Sparta Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparta Capital has no effect on the direction of High Yield i.e., High Yield and Sparta Capital go up and down completely randomly.
Pair Corralation between High Yield and Sparta Capital
Assuming the 90 days horizon High Yield is expected to generate 11.55 times less return on investment than Sparta Capital. But when comparing it to its historical volatility, High Yield Municipal Fund is 38.63 times less risky than Sparta Capital. It trades about 0.08 of its potential returns per unit of risk. Sparta Capital is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1.21 in Sparta Capital on November 3, 2024 and sell it today you would lose (0.18) from holding Sparta Capital or give up 14.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
High Yield Municipal Fund vs. Sparta Capital
Performance |
| Timeline |
| High Yield Municipal |
| Sparta Capital |
High Yield and Sparta Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with High Yield and Sparta Capital
The main advantage of trading using opposite High Yield and Sparta Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High Yield position performs unexpectedly, Sparta Capital 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 Sparta Capital will offset losses from the drop in Sparta Capital'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 |
| Sparta Capital vs. Zurn Elkay Water | Sparta Capital vs. Federal Signal | Sparta Capital vs. Energy Recovery | Sparta Capital vs. CECO Environmental Corp |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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