Correlation Between Global Core and High Yield
Can any of the company-specific risk be diversified away by investing in both Global Core 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 Global Core and High Yield into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global E Portfolio and High Yield Fund, you can compare the effects of market volatilities on Global Core 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 Global Core with a short position of High Yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Core and High Yield.
Diversification Opportunities for Global Core and High Yield
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Global and High is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Global E Portfolio and High Yield Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Yield Fund and Global Core 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 Global E Portfolio 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 Fund has no effect on the direction of Global Core i.e., Global Core and High Yield go up and down completely randomly.
Pair Corralation between Global Core and High Yield
Assuming the 90 days horizon Global E Portfolio is expected to generate 4.71 times more return on investment than High Yield. However, Global Core is 4.71 times more volatile than High Yield Fund. It trades about 0.1 of its potential returns per unit of risk. High Yield Fund is currently generating about 0.23 per unit of risk. If you would invest 1,921 in Global E Portfolio on August 31, 2024 and sell it today you would earn a total of 219.00 from holding Global E Portfolio or generate 11.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global E Portfolio vs. High Yield Fund
Performance |
| Timeline |
| Global E Portfolio |
| High Yield Fund |
Global Core and High Yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Core and High Yield
The main advantage of trading using opposite Global Core and High Yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Core 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.| Global Core vs. Legg Mason Partners | Global Core vs. Alpine High Yield | Global Core vs. Fidelity Capital Income | Global Core vs. Multi Manager High Yield |
| High Yield vs. Chestnut Street Exchange | High Yield vs. Blackrock Exchange Portfolio | High Yield vs. John Hancock Money | High Yield vs. Lord Abbett Govt |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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