Correlation Between High Yield and Pro-blend(r) Maximum

Can any of the company-specific risk be diversified away by investing in both High Yield and Pro-blend(r) Maximum 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 Pro-blend(r) Maximum into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between High Yield Bond and Pro Blend Maximum Term, you can compare the effects of market volatilities on High Yield and Pro-blend(r) Maximum 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 Pro-blend(r) Maximum. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Yield and Pro-blend(r) Maximum.

Diversification Opportunities for High Yield and Pro-blend(r) Maximum

0.69

Correlation Coefficient

High Yield  Pro-blend(r) Maximum

Poor diversification

The 3 months correlation between High and Pro-blend(r) is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Bond and Pro Blend Maximum Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pro-blend(r) Maximum 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 Bond are associated (or correlated) with Pro-blend(r) Maximum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pro-blend(r) Maximum has no effect on the direction of High Yield i.e., High Yield and Pro-blend(r) Maximum go up and down completely randomly.

Pair Corralation between High Yield and Pro-blend(r) Maximum

Assuming the 90 days horizon High Yield is expected to generate 2.98 times less return on investment than Pro-blend(r) Maximum. But when comparing it to its historical volatility, High Yield Bond is 3.82 times less risky than Pro-blend(r) Maximum. It trades about 0.15 of its potential returns per unit of risk. Pro Blend Maximum Term is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,619  in Pro Blend Maximum Term on September 3, 2024 and sell it today you would earn a total of  111.00  from holding Pro Blend Maximum Term or generate 4.24% return on investment over 90 days.

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

High Yield Bond  vs.  Pro Blend Maximum Term

High Yield Bond

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in High Yield Bond are ranked lower than 12 (%) 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.

Pro-blend(r) Maximum

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pro Blend Maximum Term are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Pro-blend(r) Maximum is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with High Yield and Pro-blend(r) Maximum

The main advantage of trading using opposite High Yield and Pro-blend(r) Maximum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High Yield position performs unexpectedly, Pro-blend(r) Maximum 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 Pro-blend(r) Maximum will offset losses from the drop in Pro-blend(r) Maximum's long position.

The idea behind High Yield Bond and Pro Blend Maximum Term 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.