Correlation Between Short Real and High Income

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

By analyzing existing cross correlation between Short Real Estate and High Income Fund, you can compare the effects of market volatilities on Short Real and High Income 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 Short Real with a short position of High Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Real and High Income.

Diversification Opportunities for Short Real and High Income

0.15

Correlation Coefficient

Short Real  High Income

Average diversification

The 3 months correlation between Short and High is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Short Real Estate and High Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Income Fund and Short Real 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 Short Real Estate are associated (or correlated) with High Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Income Fund has no effect on the direction of Short Real i.e., Short Real and High Income go up and down completely randomly.

Pair Corralation between Short Real and High Income

Assuming the 90 days horizon Short Real Estate is expected to under-perform the High Income. In addition to that, Short Real is 10.53 times more volatile than High Income Fund. It trades about -0.05 of its total potential returns per unit of risk. High Income Fund is currently generating about 0.3 per unit of volatility. If you would invest  684.00  in High Income Fund on October 22, 2024 and sell it today you would earn a total of  4.00  from holding High Income Fund or generate 0.58% return on investment over 90 days.

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

Short Real Estate  vs.  High Income Fund

Short Real Estate

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Short Real Estate are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Short Real may actually be approaching a critical reversion point that can send shares even higher in February 2025.

High Income Fund

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Short Real and High Income

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

The idea behind Short Real Estate and High Income Fund 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.