Correlation Between Strategic Income and High Income
Can any of the company-specific risk be diversified away by investing in both Strategic Income 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 Strategic Income and High Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Strategic Income Fund and High Income Fund, you can compare the effects of market volatilities on Strategic Income 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 Strategic Income with a short position of High Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Income and High Income.
Diversification Opportunities for Strategic Income and High Income
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Strategic and High is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Income Fund 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 Strategic 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 Strategic Income Fund 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 Strategic Income i.e., Strategic Income and High Income go up and down completely randomly.
Pair Corralation between Strategic Income and High Income
Assuming the 90 days horizon Strategic Income is expected to generate 110.0 times less return on investment than High Income. In addition to that, Strategic Income is 1.36 times more volatile than High Income Fund. It trades about 0.0 of its total potential returns per unit of risk. High Income Fund is currently generating about 0.15 per unit of volatility. If you would invest 868.00 in High Income Fund on September 13, 2024 and sell it today you would earn a total of 8.00 from holding High Income Fund or generate 0.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Strategic Income Fund vs. High Income Fund
Performance |
| Timeline |
| Strategic Income |
| High Income Fund |
Strategic Income and High Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Strategic Income and High Income
The main advantage of trading using opposite Strategic Income and High Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Income 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.| Strategic Income vs. Short Duration Strategic | Strategic Income vs. Short Duration Fund | Strategic Income vs. High Yield Municipal Fund | Strategic Income vs. Emerging Markets Debt |
| High Income vs. High Yield Municipal Fund | High Income vs. Diversified Bond Fund | High Income vs. Ginnie Mae Fund | High Income vs. Utilities Fund Investor |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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