Correlation Between American High and High Income
Can any of the company-specific risk be diversified away by investing in both American High and High 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 American High and High Income 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 High Income Fund, you can compare the effects of market volatilities on American High and High 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 American High with a short position of High Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of American High and High Income.
Diversification Opportunities for American High and High Income
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and High is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding American High Income and High Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Income Fund 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 High Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Income Fund has no effect on the direction of American High i.e., American High and High Income go up and down completely randomly.
Pair Corralation between American High and High Income
Assuming the 90 days horizon American High Income is expected to generate 1.15 times more return on investment than High Income. However, American High is 1.15 times more volatile than High Income Fund. It trades about 0.14 of its potential returns per unit of risk. High Income Fund is currently generating about 0.15 per unit of risk. If you would invest 815.00 in American High Income on November 2, 2024 and sell it today you would earn a total of 170.00 from holding American High Income or generate 20.86% 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. High Income Fund
Performance |
| Timeline |
| American High Income |
| High Income Fund |
American High and High Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American High and High Income
The main advantage of trading using opposite American High and High Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American High position performs unexpectedly, High 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 High Income will offset losses from the drop in High Income's long position.| American High vs. Bond Fund Of | American High vs. Capital World Bond | American High vs. Intermediate Bond Fund | American High vs. Europacific Growth Fund |
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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 Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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