Correlation Between Global E and High Yield
Can any of the company-specific risk be diversified away by investing in both Global E 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 E 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 Portfolio, you can compare the effects of market volatilities on Global E 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 E with a short position of High Yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global E and High Yield.
Diversification Opportunities for Global E and High Yield
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Global and High is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Global E Portfolio and High Yield Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Yield Portfolio and Global E 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 Portfolio has no effect on the direction of Global E i.e., Global E and High Yield go up and down completely randomly.
Pair Corralation between Global E and High Yield
Assuming the 90 days horizon Global E Portfolio is expected to generate 3.76 times more return on investment than High Yield. However, Global E is 3.76 times more volatile than High Yield Portfolio. It trades about 0.1 of its potential returns per unit of risk. High Yield Portfolio is currently generating about 0.16 per unit of risk. If you would invest 1,433 in Global E Portfolio on September 14, 2024 and sell it today you would earn a total of 761.00 from holding Global E Portfolio or generate 53.11% 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 Portfolio
Performance |
| Timeline |
| Global E Portfolio |
| High Yield Portfolio |
Global E and High Yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global E and High Yield
The main advantage of trading using opposite Global E and High Yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global E 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 E vs. Global Advantage Portfolio | Global E vs. Ridgeworth Innovative Growth | Global E vs. Transamerica Capital Growth | Global E vs. Internet Ultrasector Profund |
| High Yield vs. California High Yield Municipal | High Yield vs. Gamco Global Telecommunications | High Yield vs. Ab Impact Municipal | High Yield vs. Franklin High Yield |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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