Correlation Between High Yield and Chestnut Street
Can any of the company-specific risk be diversified away by investing in both High Yield and Chestnut Street 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 Chestnut Street 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 Chestnut Street Exchange, you can compare the effects of market volatilities on High Yield and Chestnut Street 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 Chestnut Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Yield and Chestnut Street.
Diversification Opportunities for High Yield and Chestnut Street
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between High and Chestnut is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Fund and Chestnut Street Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chestnut Street Exchange 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 Chestnut Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chestnut Street Exchange has no effect on the direction of High Yield i.e., High Yield and Chestnut Street go up and down completely randomly.
Pair Corralation between High Yield and Chestnut Street
Assuming the 90 days horizon High Yield is expected to generate 2.23 times less return on investment than Chestnut Street. But when comparing it to its historical volatility, High Yield Fund is 2.92 times less risky than Chestnut Street. It trades about 0.17 of its potential returns per unit of risk. Chestnut Street Exchange is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 96,115 in Chestnut Street Exchange on September 2, 2024 and sell it today you would earn a total of 22,577 from holding Chestnut Street Exchange or generate 23.49% 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. Chestnut Street Exchange
Performance |
| Timeline |
| High Yield Fund |
| Chestnut Street Exchange |
High Yield and Chestnut Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with High Yield and Chestnut Street
The main advantage of trading using opposite High Yield and Chestnut Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High Yield position performs unexpectedly, Chestnut Street 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 Chestnut Street will offset losses from the drop in Chestnut Street's long position.| High Yield vs. Global Fixed Income | High Yield vs. Global E Portfolio | High Yield vs. Global E Portfolio | High Yield vs. Global E Portfolio |
| Chestnut Street vs. Dws Government Money | Chestnut Street vs. Jpmorgan Trust I | Chestnut Street vs. T Rowe Price | Chestnut Street vs. Cref Money Market |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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