Correlation Between Growth Strategy and High Yield
Can any of the company-specific risk be diversified away by investing in both Growth Strategy 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 Growth Strategy and High Yield into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Strategy Fund and High Yield Portfolio, you can compare the effects of market volatilities on Growth Strategy 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 Growth Strategy with a short position of High Yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Strategy and High Yield.
Diversification Opportunities for Growth Strategy and High Yield
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Growth and High is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Growth Strategy Fund 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 Growth Strategy 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 Growth Strategy Fund 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 Growth Strategy i.e., Growth Strategy and High Yield go up and down completely randomly.
Pair Corralation between Growth Strategy and High Yield
Assuming the 90 days horizon Growth Strategy Fund is expected to generate 3.67 times more return on investment than High Yield. However, Growth Strategy is 3.67 times more volatile than High Yield Portfolio. It trades about 0.22 of its potential returns per unit of risk. High Yield Portfolio is currently generating about 0.25 per unit of risk. If you would invest 1,256 in Growth Strategy Fund on November 4, 2024 and sell it today you would earn a total of 34.00 from holding Growth Strategy Fund or generate 2.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Strategy Fund vs. High Yield Portfolio
Performance |
| Timeline |
| Growth Strategy |
| High Yield Portfolio |
Growth Strategy and High Yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Strategy and High Yield
The main advantage of trading using opposite Growth Strategy and High Yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Strategy 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.| Growth Strategy vs. Health Care Ultrasector | Growth Strategy vs. Eaton Vance Worldwide | Growth Strategy vs. Alphacentric Lifesci Healthcare | Growth Strategy vs. Highland Longshort Healthcare |
| High Yield vs. Rational Strategic Allocation | High Yield vs. Qs Large Cap | High Yield vs. T Rowe Price | High Yield vs. Growth Portfolio Class |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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