Correlation Between High Income and Zero Coupon
Can any of the company-specific risk be diversified away by investing in both High Income and Zero Coupon 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 Income and Zero Coupon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between High Income Fund and Zero Pon 2025, you can compare the effects of market volatilities on High Income and Zero Coupon 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 Income with a short position of Zero Coupon. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Income and Zero Coupon.
Diversification Opportunities for High Income and Zero Coupon
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between High and Zero is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding High Income Fund and Zero Pon 2025 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zero Pon 2025 and High 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 High Income Fund are associated (or correlated) with Zero Coupon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zero Pon 2025 has no effect on the direction of High Income i.e., High Income and Zero Coupon go up and down completely randomly.
Pair Corralation between High Income and Zero Coupon
Assuming the 90 days horizon High Income Fund is expected to generate 1.1 times more return on investment than Zero Coupon. However, High Income is 1.1 times more volatile than Zero Pon 2025. It trades about 0.15 of its potential returns per unit of risk. Zero Pon 2025 is currently generating about 0.11 per unit of risk. If you would invest 751.00 in High Income Fund on September 1, 2024 and sell it today you would earn a total of 123.00 from holding High Income Fund or generate 16.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
High Income Fund vs. Zero Pon 2025
Performance |
| Timeline |
| High Income Fund |
| Zero Pon 2025 |
High Income and Zero Coupon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with High Income and Zero Coupon
The main advantage of trading using opposite High Income and Zero Coupon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High Income position performs unexpectedly, Zero Coupon 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 Zero Coupon will offset losses from the drop in Zero Coupon's long position.| High Income vs. High Yield Municipal Fund | High Income vs. Diversified Bond Fund | High Income vs. Utilities Fund Investor | High Income vs. Emerging Markets Fund |
| Zero Coupon vs. Wasatch Hoisington Treasury Fund | Zero Coupon vs. Bts Tactical Fixed | Zero Coupon vs. Utilities Fund Investor | Zero Coupon vs. Inflation Adjusted Bond Fund |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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