Correlation Between High Income and Growth Income
Can any of the company-specific risk be diversified away by investing in both High Income and Growth 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 High Income and Growth Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between High Income Fund and Growth Income Fund, you can compare the effects of market volatilities on High Income and Growth 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 High Income with a short position of Growth Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Income and Growth Income.
Diversification Opportunities for High Income and Growth Income
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between High and Growth is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding High Income Fund and Growth Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Income and High Income 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 Income Fund are associated (or correlated) with Growth Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Income has no effect on the direction of High Income i.e., High Income and Growth Income go up and down completely randomly.
Pair Corralation between High Income and Growth Income
Assuming the 90 days horizon High Income is expected to generate 1.91 times less return on investment than Growth Income. But when comparing it to its historical volatility, High Income Fund is 3.58 times less risky than Growth Income. It trades about 0.13 of its potential returns per unit of risk. Growth Income Fund is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,110 in Growth Income Fund on August 24, 2024 and sell it today you would earn a total of 767.00 from holding Growth Income Fund or generate 36.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
High Income Fund vs. Growth Income Fund
Performance |
| Timeline |
| High Income Fund |
| Growth Income |
High Income and Growth Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with High Income and Growth Income
The main advantage of trading using opposite High Income and Growth Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High Income position performs unexpectedly, Growth 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 Growth Income will offset losses from the drop in Growth Income's long position.| High Income vs. Virtus High Yield | High Income vs. Multi Manager High Yield | High Income vs. Pioneer High Yield | High Income vs. Prudential High Yield |
| Growth Income vs. American Funds Conservative | Growth Income vs. Evaluator Conservative Rms | Growth Income vs. Massmutual Premier Diversified | Growth Income vs. Western Asset Diversified |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
Other Complementary Tools
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios |