Correlation Between Corporate Bond and High Yield
Can any of the company-specific risk be diversified away by investing in both Corporate Bond 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 Corporate Bond and High Yield into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Corporate Bond Portfolio and High Yield Fund, you can compare the effects of market volatilities on Corporate Bond 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 Corporate Bond with a short position of High Yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Corporate Bond and High Yield.
Diversification Opportunities for Corporate Bond and High Yield
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Corporate and High is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Corporate Bond 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 Corporate Bond 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 Corporate Bond 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 Corporate Bond i.e., Corporate Bond and High Yield go up and down completely randomly.
Pair Corralation between Corporate Bond and High Yield
Assuming the 90 days horizon Corporate Bond is expected to generate 1.81 times less return on investment than High Yield. In addition to that, Corporate Bond is 2.67 times more volatile than High Yield Fund. It trades about 0.08 of its total potential returns per unit of risk. High Yield Fund is currently generating about 0.37 per unit of volatility. If you would invest 324.00 in High Yield Fund on August 28, 2024 and sell it today you would earn a total of 4.00 from holding High Yield Fund or generate 1.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Corporate Bond Portfolio vs. High Yield Fund
Performance |
| Timeline |
| Corporate Bond Portfolio |
| High Yield Fund |
Corporate Bond and High Yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Corporate Bond and High Yield
The main advantage of trading using opposite Corporate Bond and High Yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corporate Bond 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.| Corporate Bond vs. International Equity Portfolio | Corporate Bond vs. Royce Special Equity | Corporate Bond vs. Growth Portfolio Class | Corporate Bond vs. Small Pany Growth |
| High Yield vs. Emerging Markets Equity | High Yield vs. Global Fixed Income | High Yield vs. Global Fixed Income | High Yield vs. Global Fixed Income |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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