Correlation Between American High-income and Performance Trust
Can any of the company-specific risk be diversified away by investing in both American High-income and Performance Trust 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 Performance Trust 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 Performance Trust Municipal, you can compare the effects of market volatilities on American High-income and Performance Trust 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 Performance Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of American High-income and Performance Trust.
Diversification Opportunities for American High-income and Performance Trust
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Performance is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding American High Income Municipal and Performance Trust Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Performance Trust 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 Performance Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Performance Trust has no effect on the direction of American High-income i.e., American High-income and Performance Trust go up and down completely randomly.
Pair Corralation between American High-income and Performance Trust
Assuming the 90 days horizon American High Income Municipal is expected to generate 1.51 times more return on investment than Performance Trust. However, American High-income is 1.51 times more volatile than Performance Trust Municipal. It trades about 0.16 of its potential returns per unit of risk. Performance Trust Municipal is currently generating about 0.15 per unit of risk. If you would invest 1,466 in American High Income Municipal on June 8, 2025 and sell it today you would earn a total of 32.00 from holding American High Income Municipal or generate 2.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American High Income Municipal vs. Performance Trust Municipal
Performance |
| Timeline |
| American High Income |
| Performance Trust |
American High-income and Performance Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American High-income and Performance Trust
The main advantage of trading using opposite American High-income and Performance Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American High-income position performs unexpectedly, Performance Trust 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 Performance Trust will offset losses from the drop in Performance Trust's long position.The idea behind American High Income Municipal and Performance Trust Municipal 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.
| Performance Trust vs. Performance Trust Municipal | Performance Trust vs. Performance Trust Strategic | Performance Trust vs. Guggenheim Investment Grade | Performance Trust vs. Nuveen High Yield |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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