Correlation Between American High-income and Northern High
Can any of the company-specific risk be diversified away by investing in both American High-income and Northern High 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 American High-income and Northern High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American High Income Municipal and Northern High Yield, you can compare the effects of market volatilities on American High-income and Northern High 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 American High-income with a short position of Northern High. Check out your portfolio center. Please also check ongoing floating volatility patterns of American High-income and Northern High.
Diversification Opportunities for American High-income and Northern High
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and Northern is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding American High Income Municipal and Northern High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern High Yield and American High-income 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 American High Income Municipal are associated (or correlated) with Northern High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern High Yield has no effect on the direction of American High-income i.e., American High-income and Northern High go up and down completely randomly.
Pair Corralation between American High-income and Northern High
Assuming the 90 days horizon American High Income Municipal is expected to generate 5.49 times more return on investment than Northern High. However, American High-income is 5.49 times more volatile than Northern High Yield. It trades about 0.2 of its potential returns per unit of risk. Northern High Yield is currently generating about -0.3 per unit of risk. If you would invest 1,527 in American High Income Municipal on November 27, 2024 and sell it today you would earn a total of 14.00 from holding American High Income Municipal or generate 0.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 55.0% |
| Values | Daily Returns |
American High Income Municipal vs. Northern High Yield
Performance |
| Timeline |
| American High Income |
| Northern High Yield |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
American High-income and Northern High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American High-income and Northern High
The main advantage of trading using opposite American High-income and Northern High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American High-income position performs unexpectedly, Northern High 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 Northern High will offset losses from the drop in Northern High's long position.| American High-income vs. Versatile Bond Portfolio | American High-income vs. Ab Bond Inflation | American High-income vs. Artisan High Income | American High-income vs. Ab Bond Inflation |
| Northern High vs. Northern High Yield | Northern High vs. Northern Tax Exempt Fund | Northern High vs. Northern Intermediate Tax Exempt | Northern High vs. High Yield Municipal 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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