Correlation Between American High-income and Global Technology
Can any of the company-specific risk be diversified away by investing in both American High-income and Global Technology 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 Global Technology 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 Global Technology Portfolio, you can compare the effects of market volatilities on American High-income and Global Technology 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 Global Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of American High-income and Global Technology.
Diversification Opportunities for American High-income and Global Technology
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between American and Global is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding American High Income Municipal and Global Technology Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Technology 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 Global Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Technology has no effect on the direction of American High-income i.e., American High-income and Global Technology go up and down completely randomly.
Pair Corralation between American High-income and Global Technology
Assuming the 90 days horizon American High-income is expected to generate 2.85 times less return on investment than Global Technology. But when comparing it to its historical volatility, American High Income Municipal is 5.62 times less risky than Global Technology. It trades about 0.06 of its potential returns per unit of risk. Global Technology Portfolio is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,049 in Global Technology Portfolio on October 13, 2024 and sell it today you would earn a total of 88.00 from holding Global Technology Portfolio or generate 4.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American High Income Municipal vs. Global Technology Portfolio
Performance |
| Timeline |
| American High Income |
| Global Technology |
American High-income and Global Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American High-income and Global Technology
The main advantage of trading using opposite American High-income and Global Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American High-income position performs unexpectedly, Global Technology 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 Global Technology will offset losses from the drop in Global Technology's long position.| American High-income vs. Bbh Intermediate Municipal | American High-income vs. Rbc Ultra Short Fixed | American High-income vs. Barings High Yield | American High-income vs. Alliancebernstein Bond |
| Global Technology vs. Transamerica Intermediate Muni | Global Technology vs. Blrc Sgy Mnp | Global Technology vs. Nuveen Strategic Municipal | Global Technology vs. American High Income Municipal |
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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