Correlation Between American High and Blackrock High
Can any of the company-specific risk be diversified away by investing in both American High and Blackrock 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 and Blackrock 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 and Blackrock High Yield, you can compare the effects of market volatilities on American High and Blackrock 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 with a short position of Blackrock High. Check out your portfolio center. Please also check ongoing floating volatility patterns of American High and Blackrock High.
Diversification Opportunities for American High and Blackrock High
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Blackrock is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding American High Income and Blackrock High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock High Yield 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 are associated (or correlated) with Blackrock High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock High Yield has no effect on the direction of American High i.e., American High and Blackrock High go up and down completely randomly.
Pair Corralation between American High and Blackrock High
Assuming the 90 days horizon American High Income is expected to generate 0.88 times more return on investment than Blackrock High. However, American High Income is 1.14 times less risky than Blackrock High. It trades about 0.3 of its potential returns per unit of risk. Blackrock High Yield is currently generating about 0.26 per unit of risk. If you would invest 976.00 in American High Income on August 31, 2024 and sell it today you would earn a total of 10.00 from holding American High Income or generate 1.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American High Income vs. Blackrock High Yield
Performance |
| Timeline |
| American High Income |
| Blackrock High Yield |
American High and Blackrock High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American High and Blackrock High
The main advantage of trading using opposite American High and Blackrock High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American High position performs unexpectedly, Blackrock 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 Blackrock High will offset losses from the drop in Blackrock High's long position.The idea behind American High Income and Blackrock High Yield pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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