Correlation Between High Yield and Msift Mid

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

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

Diversification Opportunities for High Yield and Msift Mid

0.88

Correlation Coefficient

High Yield  Msift Mid

Very poor diversification

The 3 months correlation between High and Msift is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Fund and Msift Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Msift Mid Cap 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 Fund are associated (or correlated) with Msift Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Msift Mid Cap has no effect on the direction of High Yield i.e., High Yield and Msift Mid go up and down completely randomly.

Pair Corralation between High Yield and Msift Mid

Assuming the 90 days horizon High Yield is expected to generate 13.47 times less return on investment than Msift Mid. But when comparing it to its historical volatility, High Yield Fund is 12.95 times less risky than Msift Mid. It trades about 0.1 of its potential returns per unit of risk. Msift Mid Cap is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,305  in Msift Mid Cap on September 20, 2024 and sell it today you would earn a total of  50.00  from holding Msift Mid Cap or generate 3.83% return on investment over 90 days.

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

High Yield Fund  vs.  Msift Mid Cap

High Yield Fund

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in High Yield Fund are ranked lower than 5 (%) 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.

Msift Mid Cap

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Msift Mid Cap are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Msift Mid showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with High Yield and Msift Mid

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

The idea behind High Yield Fund and Msift Mid Cap 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.