Correlation Between American High-income and Eaton Vance

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

By analyzing existing cross correlation between American High Income Municipal and Eaton Vance High, you can compare the effects of market volatilities on American High-income and Eaton Vance 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 American High-income with a short position of Eaton Vance. Check out your portfolio center. Please also check ongoing floating volatility patterns of American High-income and Eaton Vance.

Diversification Opportunities for American High-income and Eaton Vance

1.0

Correlation Coefficient

American High-income  Eaton Vance

No risk reduction

The 3 months correlation between American and Eaton is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding American High Income Municipal and Eaton Vance High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton Vance High and American 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 American High Income Municipal are associated (or correlated) with Eaton Vance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton Vance High has no effect on the direction of American High-income i.e., American High-income and Eaton Vance go up and down completely randomly.

Pair Corralation between American High-income and Eaton Vance

Assuming the 90 days horizon American High-income is expected to generate 1.57 times less return on investment than Eaton Vance. But when comparing it to its historical volatility, American High Income Municipal is 1.24 times less risky than Eaton Vance. It trades about 0.07 of its potential returns per unit of risk. Eaton Vance High is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  814.00  in Eaton Vance High on October 23, 2024 and sell it today you would earn a total of  4.00  from holding Eaton Vance High or generate 0.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	94.74%
Values	Daily Returns

American High Income Municipal  vs.  Eaton Vance High

American High Income

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American High Income Municipal are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, American High-income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Eaton Vance High

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eaton Vance High are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Eaton Vance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American High-income and Eaton Vance

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

The idea behind American High Income Municipal and Eaton Vance High 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.