Correlation Between Balanced Fund and High Yield
Can any of the company-specific risk be diversified away by investing in both Balanced Fund 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 Balanced Fund and High Yield into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balanced Fund Investor and High Yield Fund, you can compare the effects of market volatilities on Balanced Fund 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 Balanced Fund with a short position of High Yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Fund and High Yield.
Diversification Opportunities for Balanced Fund and High Yield
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Balanced and High is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Investor 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 Balanced Fund 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 Balanced Fund Investor 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 Balanced Fund i.e., Balanced Fund and High Yield go up and down completely randomly.
Pair Corralation between Balanced Fund and High Yield
Assuming the 90 days horizon Balanced Fund Investor is expected to generate 3.09 times more return on investment than High Yield. However, Balanced Fund is 3.09 times more volatile than High Yield Fund. It trades about 0.08 of its potential returns per unit of risk. High Yield Fund is currently generating about 0.18 per unit of risk. If you would invest 1,820 in Balanced Fund Investor on October 22, 2024 and sell it today you would earn a total of 173.00 from holding Balanced Fund Investor or generate 9.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Balanced Fund Investor vs. High Yield Fund
Performance |
| Timeline |
| Balanced Fund Investor |
| High Yield Fund |
Balanced Fund and High Yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balanced Fund and High Yield
The main advantage of trading using opposite Balanced Fund and High Yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balanced Fund 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.| Balanced Fund vs. Select Fund Investor | Balanced Fund vs. Heritage Fund Investor | Balanced Fund vs. Value Fund Investor | Balanced Fund vs. Growth Fund Investor |
| High Yield vs. High Income Fund | High Yield vs. High Yield Portfolio | High Yield vs. High Yield Portfolio | High Yield vs. High Yield Portfolio |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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