Correlation Between Ultra-short Fixed and High Yield
Can any of the company-specific risk be diversified away by investing in both Ultra-short Fixed 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 Ultra-short Fixed and High Yield into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ultra Short Fixed Income and High Yield Fund, you can compare the effects of market volatilities on Ultra-short Fixed 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 Ultra-short Fixed with a short position of High Yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra-short Fixed and High Yield.
Diversification Opportunities for Ultra-short Fixed and High Yield
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ultra-short and High is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Short Fixed Income 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 Ultra-short Fixed 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 Ultra Short Fixed Income 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 Ultra-short Fixed i.e., Ultra-short Fixed and High Yield go up and down completely randomly.
Pair Corralation between Ultra-short Fixed and High Yield
Assuming the 90 days horizon Ultra-short Fixed is expected to generate 1.71 times less return on investment than High Yield. But when comparing it to its historical volatility, Ultra Short Fixed Income is 2.16 times less risky than High Yield. It trades about 0.24 of its potential returns per unit of risk. High Yield Fund is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 688.00 in High Yield Fund on September 4, 2024 and sell it today you would earn a total of 66.00 from holding High Yield Fund or generate 9.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ultra Short Fixed Income vs. High Yield Fund
Performance |
| Timeline |
| Ultra Short Fixed |
| High Yield Fund |
Ultra-short Fixed and High Yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ultra-short Fixed and High Yield
The main advantage of trading using opposite Ultra-short Fixed and High Yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultra-short Fixed 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.| Ultra-short Fixed vs. Janus Global Technology | Ultra-short Fixed vs. Columbia Global Technology | Ultra-short Fixed vs. Global Technology Portfolio | Ultra-short Fixed vs. Invesco Technology Fund |
| High Yield vs. Touchstone Sands Capital | High Yield vs. Mid Cap Growth | High Yield vs. Mid Cap Growth | High Yield vs. Sentinel Small Pany |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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