Correlation Between High-yield Municipal and High-yield Fund
Can any of the company-specific risk be diversified away by investing in both High-yield Municipal and High-yield Fund 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 High-yield Municipal and High-yield Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between High Yield Municipal Fund and High Yield Fund R6, you can compare the effects of market volatilities on High-yield Municipal and High-yield Fund 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 High-yield Municipal with a short position of High-yield Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of High-yield Municipal and High-yield Fund.
Diversification Opportunities for High-yield Municipal and High-yield Fund
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between High-yield and High-yield is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund and High Yield Fund R6 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Yield Fund and High-yield Municipal 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 High Yield Municipal Fund are associated (or correlated) with High-yield Fund. 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 Fund has no effect on the direction of High-yield Municipal i.e., High-yield Municipal and High-yield Fund go up and down completely randomly.
Pair Corralation between High-yield Municipal and High-yield Fund
Assuming the 90 days horizon High-yield Municipal is expected to generate 1.33 times less return on investment than High-yield Fund. In addition to that, High-yield Municipal is 1.08 times more volatile than High Yield Fund R6. It trades about 0.09 of its total potential returns per unit of risk. High Yield Fund R6 is currently generating about 0.12 per unit of volatility. If you would invest 449.00 in High Yield Fund R6 on August 31, 2024 and sell it today you would earn a total of 63.00 from holding High Yield Fund R6 or generate 14.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
High Yield Municipal Fund vs. High Yield Fund R6
Performance |
| Timeline |
| High Yield Municipal |
| High Yield Fund |
High-yield Municipal and High-yield Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with High-yield Municipal and High-yield Fund
The main advantage of trading using opposite High-yield Municipal and High-yield Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High-yield Municipal position performs unexpectedly, High-yield Fund 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 Fund will offset losses from the drop in High-yield Fund's long position.| High-yield Municipal vs. Nuveen High Yield | High-yield Municipal vs. Nuveen High Yield | High-yield Municipal vs. Nuveen High Yield | High-yield Municipal vs. Nuveen High Yield |
| High-yield Fund vs. Sp Midcap Index | High-yield Fund vs. Calvert Developed Market | High-yield Fund vs. Vanguard Developed Markets | High-yield Fund vs. Origin Emerging Markets |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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