Correlation Between High Yield and International Opportunity
Can any of the company-specific risk be diversified away by investing in both High Yield and International Opportunity 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 International Opportunity 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 International Opportunity Portfolio, you can compare the effects of market volatilities on High Yield and International Opportunity 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 International Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Yield and International Opportunity.
Diversification Opportunities for High Yield and International Opportunity
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between High and International is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Fund and International Opportunity Port in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Opportunity 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 International Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Opportunity has no effect on the direction of High Yield i.e., High Yield and International Opportunity go up and down completely randomly.
Pair Corralation between High Yield and International Opportunity
Assuming the 90 days horizon High Yield is expected to generate 1.71 times less return on investment than International Opportunity. But when comparing it to its historical volatility, High Yield Fund is 4.05 times less risky than International Opportunity. It trades about 0.16 of its potential returns per unit of risk. International Opportunity Portfolio is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,341 in International Opportunity Portfolio on August 31, 2024 and sell it today you would earn a total of 635.00 from holding International Opportunity Portfolio or generate 27.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
High Yield Fund vs. International Opportunity Port
Performance |
| Timeline |
| High Yield Fund |
| International Opportunity |
High Yield and International Opportunity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with High Yield and International Opportunity
The main advantage of trading using opposite High Yield and International Opportunity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High Yield position performs unexpectedly, International Opportunity 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 International Opportunity will offset losses from the drop in International Opportunity's long position.| High Yield vs. Chestnut Street Exchange | High Yield vs. Blackrock Exchange Portfolio | High Yield vs. John Hancock Money | High Yield vs. Lord Abbett Govt |
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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