Correlation Between High Yield and Global Diversified
Can any of the company-specific risk be diversified away by investing in both High Yield and Global Diversified 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 and Global Diversified into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between High Yield Fund and Global Diversified Income, you can compare the effects of market volatilities on High Yield and Global Diversified 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 with a short position of Global Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Yield and Global Diversified.
Diversification Opportunities for High Yield and Global Diversified
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between High and Global is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Fund and Global Diversified Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Diversified Income and High Yield 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 Fund are associated (or correlated) with Global Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Diversified Income has no effect on the direction of High Yield i.e., High Yield and Global Diversified go up and down completely randomly.
Pair Corralation between High Yield and Global Diversified
Assuming the 90 days horizon High Yield Fund is expected to generate 0.99 times more return on investment than Global Diversified. However, High Yield Fund is 1.01 times less risky than Global Diversified. It trades about 0.16 of its potential returns per unit of risk. Global Diversified Income is currently generating about 0.13 per unit of risk. If you would invest 714.00 in High Yield Fund on August 31, 2024 and sell it today you would earn a total of 103.00 from holding High Yield Fund or generate 14.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
High Yield Fund vs. Global Diversified Income
Performance |
| Timeline |
| High Yield Fund |
| Global Diversified Income |
High Yield and Global Diversified Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with High Yield and Global Diversified
The main advantage of trading using opposite High Yield and Global Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High Yield position performs unexpectedly, Global Diversified 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 Global Diversified will offset losses from the drop in Global Diversified's long position.| High Yield vs. Vanguard High Yield Corporate | High Yield vs. Vanguard High Yield Porate | High Yield vs. Blackrock Hi Yld | High Yield vs. Blackrock High Yield |
| Global Diversified vs. Janus Global Technology | Global Diversified vs. Technology Ultrasector Profund | Global Diversified vs. Science Technology Fund | Global Diversified vs. Icon Information Technology |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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