Correlation Between Aig Government and High-yield Fund

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

By analyzing existing cross correlation between Aig Government Money and High Yield Fund R5, you can compare the effects of market volatilities on Aig Government and High-yield Fund 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 Aig Government with a short position of High-yield Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aig Government and High-yield Fund.

Diversification Opportunities for Aig Government and High-yield Fund

0.74

Correlation Coefficient

Aig Government  High-yield Fund

Poor diversification

The 3 months correlation between Aig and High-yield is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Aig Government Money and High Yield Fund R5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Yield Fund and Aig Government 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 Aig Government Money are associated (or correlated) with High-yield Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Yield Fund has no effect on the direction of Aig Government i.e., Aig Government and High-yield Fund go up and down completely randomly.

Pair Corralation between Aig Government and High-yield Fund

Assuming the 90 days horizon Aig Government is expected to generate 3.28 times less return on investment than High-yield Fund. But when comparing it to its historical volatility, Aig Government Money is 1.21 times less risky than High-yield Fund. It trades about 0.06 of its potential returns per unit of risk. High Yield Fund R5 is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  500.00  in High Yield Fund R5 on December 21, 2024 and sell it today you would earn a total of  10.00  from holding High Yield Fund R5 or generate 2.0% return on investment over 90 days.

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

Aig Government Money  vs.  High Yield Fund R5

Aig Government Money

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aig Government Money are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Aig Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

High Yield Fund

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in High Yield Fund R5 are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, High-yield Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aig Government and High-yield Fund

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

The idea behind Aig Government Money and High Yield Fund R5 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.