Correlation Between Intermediate-term and American High-income
Can any of the company-specific risk be diversified away by investing in both Intermediate-term and American High-income 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 Intermediate-term and American High-income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intermediate Term Tax Free Bond and American High Income Municipal, you can compare the effects of market volatilities on Intermediate-term and American High-income 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 Intermediate-term with a short position of American High-income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intermediate-term and American High-income.
Diversification Opportunities for Intermediate-term and American High-income
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Intermediate-term and American is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Term Tax Free Bon and American High Income Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American High Income and Intermediate-term 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 Intermediate Term Tax Free Bond are associated (or correlated) with American High-income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American High Income has no effect on the direction of Intermediate-term i.e., Intermediate-term and American High-income go up and down completely randomly.
Pair Corralation between Intermediate-term and American High-income
Assuming the 90 days horizon Intermediate Term Tax Free Bond is expected to generate 0.77 times more return on investment than American High-income. However, Intermediate Term Tax Free Bond is 1.3 times less risky than American High-income. It trades about 0.04 of its potential returns per unit of risk. American High Income Municipal is currently generating about 0.02 per unit of risk. If you would invest 1,067 in Intermediate Term Tax Free Bond on November 1, 2024 and sell it today you would earn a total of 6.00 from holding Intermediate Term Tax Free Bond or generate 0.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 98.33% |
| Values | Daily Returns |
Intermediate Term Tax Free Bon vs. American High Income Municipal
Performance |
| Timeline |
| Intermediate Term Tax |
| American High Income |
Intermediate-term and American High-income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Intermediate-term and American High-income
The main advantage of trading using opposite Intermediate-term and American High-income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intermediate-term position performs unexpectedly, American High-income 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 American High-income will offset losses from the drop in American High-income's long position.| Intermediate-term vs. Allianzgi Convertible Income | Intermediate-term vs. Fidelity Sai Convertible | Intermediate-term vs. Advent Claymore Convertible | Intermediate-term vs. Absolute Convertible Arbitrage |
| American High-income vs. Virtus Convertible | American High-income vs. Putnam Convertible Securities | American High-income vs. Fidelity Sai Convertible | American High-income vs. Allianzgi Convertible Income |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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