Correlation Between Income Growth and High Yield
Can any of the company-specific risk be diversified away by investing in both Income Growth and High Yield 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 Income Growth and High Yield into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Income Growth Fund and High Yield Municipal Fund, you can compare the effects of market volatilities on Income Growth and High Yield 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 Income Growth with a short position of High Yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Growth and High Yield.
Diversification Opportunities for Income Growth and High Yield
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Income and High is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Income Growth Fund and High Yield Municipal Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Yield Municipal and Income Growth 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 Income Growth Fund are associated (or correlated) with High Yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Yield Municipal has no effect on the direction of Income Growth i.e., Income Growth and High Yield go up and down completely randomly.
Pair Corralation between Income Growth and High Yield
Assuming the 90 days horizon Income Growth Fund is expected to generate 2.45 times more return on investment than High Yield. However, Income Growth is 2.45 times more volatile than High Yield Municipal Fund. It trades about 0.14 of its potential returns per unit of risk. High Yield Municipal Fund is currently generating about 0.03 per unit of risk. If you would invest 3,626 in Income Growth Fund on September 12, 2024 and sell it today you would earn a total of 224.00 from holding Income Growth Fund or generate 6.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Income Growth Fund vs. High Yield Municipal Fund
Performance |
| Timeline |
| Income Growth |
| High Yield Municipal |
Income Growth and High Yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Income Growth and High Yield
The main advantage of trading using opposite Income Growth and High Yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income Growth position performs unexpectedly, High Yield 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 Yield will offset losses from the drop in High Yield's long position.| Income Growth vs. Ultra Fund I | Income Growth vs. Value Fund I | Income Growth vs. Equity Growth Fund | Income Growth vs. International 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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