Correlation Between High Yield and Arax Holdings

Can any of the company-specific risk be diversified away by investing in both High Yield and Arax Holdings 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 Arax Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between High Yield Municipal Fund and Arax Holdings Corp, you can compare the effects of market volatilities on High Yield and Arax Holdings 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 Arax Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Yield and Arax Holdings.

Diversification Opportunities for High Yield and Arax Holdings

0.01

Correlation Coefficient

High Yield  Arax Holdings

Significant diversification

The 3 months correlation between High and Arax is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund and Arax Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arax Holdings Corp 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 Municipal Fund are associated (or correlated) with Arax Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arax Holdings Corp has no effect on the direction of High Yield i.e., High Yield and Arax Holdings go up and down completely randomly.

Pair Corralation between High Yield and Arax Holdings

Assuming the 90 days horizon High Yield Municipal Fund is expected to generate 0.06 times more return on investment than Arax Holdings. However, High Yield Municipal Fund is 18.16 times less risky than Arax Holdings. It trades about 0.03 of its potential returns per unit of risk. Arax Holdings Corp is currently generating about -0.2 per unit of risk. If you would invest  898.00  in High Yield Municipal Fund on September 14, 2024 and sell it today you would earn a total of  5.00  from holding High Yield Municipal Fund or generate 0.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

High Yield Municipal Fund  vs.  Arax Holdings Corp

High Yield Municipal

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in High Yield Municipal Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, High Yield is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Arax Holdings Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arax Holdings Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with High Yield and Arax Holdings

The main advantage of trading using opposite High Yield and Arax Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High Yield position performs unexpectedly, Arax Holdings 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 Arax Holdings will offset losses from the drop in Arax Holdings' long position.

The idea behind High Yield Municipal Fund and Arax Holdings Corp 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.