Correlation Between American High and Sierra Tactical
Can any of the company-specific risk be diversified away by investing in both American High and Sierra Tactical 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 and Sierra Tactical 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 Sierra Tactical Municipal, you can compare the effects of market volatilities on American High and Sierra Tactical 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 with a short position of Sierra Tactical. Check out your portfolio center. Please also check ongoing floating volatility patterns of American High and Sierra Tactical.
Diversification Opportunities for American High and Sierra Tactical
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Sierra is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding American High Income Municipal and Sierra Tactical Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra Tactical Municipal and American High 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 Sierra Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sierra Tactical Municipal has no effect on the direction of American High i.e., American High and Sierra Tactical go up and down completely randomly.
Pair Corralation between American High and Sierra Tactical
Assuming the 90 days horizon American High Income Municipal is expected to generate 0.93 times more return on investment than Sierra Tactical. However, American High Income Municipal is 1.08 times less risky than Sierra Tactical. It trades about 0.22 of its potential returns per unit of risk. Sierra Tactical Municipal is currently generating about 0.16 per unit of risk. If you would invest 1,530 in American High Income Municipal on August 30, 2024 and sell it today you would earn a total of 24.00 from holding American High Income Municipal or generate 1.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American High Income Municipal vs. Sierra Tactical Municipal
Performance |
| Timeline |
| American High Income |
| Sierra Tactical Municipal |
American High and Sierra Tactical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American High and Sierra Tactical
The main advantage of trading using opposite American High and Sierra Tactical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American High position performs unexpectedly, Sierra Tactical 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 Sierra Tactical will offset losses from the drop in Sierra Tactical's long position.| American High vs. Versatile Bond Portfolio | American High vs. Nebraska Municipal Fund | American High vs. Artisan Emerging Markets | American High vs. Bbh Intermediate Municipal |
| Sierra Tactical vs. Baillie Gifford Health | Sierra Tactical vs. Blackrock Health Sciences | Sierra Tactical vs. Lord Abbett Health | Sierra Tactical vs. Health Care 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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