Correlation Between High Yield and Northern High

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Can any of the company-specific risk be diversified away by investing in both High Yield and Northern High 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 Northern High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between High Yield Fund Investor and Northern High Yield, you can compare the effects of market volatilities on High Yield and Northern High 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 Northern High. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Yield and Northern High.

Diversification Opportunities for High Yield and Northern High

0.78
  Correlation Coefficient

Poor diversification

The 3 months correlation between High and Northern is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Fund Investor and Northern High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern High Yield 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 Investor are associated (or correlated) with Northern High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern High Yield has no effect on the direction of High Yield i.e., High Yield and Northern High go up and down completely randomly.

Pair Corralation between High Yield and Northern High

Assuming the 90 days horizon High Yield is expected to generate 1.26 times less return on investment than Northern High. But when comparing it to its historical volatility, High Yield Fund Investor is 1.1 times less risky than Northern High. It trades about 0.07 of its potential returns per unit of risk. Northern High Yield is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  606.00  in Northern High Yield on September 14, 2024 and sell it today you would earn a total of  6.00  from holding Northern High Yield or generate 0.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

High Yield Fund Investor  vs.  Northern High Yield

 Performance 
       Timeline  
High Yield Fund 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in High Yield Fund Investor are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, High Yield is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Northern High Yield 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Northern High Yield are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Northern High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

High Yield and Northern High Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with High Yield and Northern High

The main advantage of trading using opposite High Yield and Northern High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High Yield position performs unexpectedly, Northern High 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 Northern High will offset losses from the drop in Northern High's long position.
The idea behind High Yield Fund Investor and Northern High Yield pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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