Correlation Between Total Return and High Yield
Can any of the company-specific risk be diversified away by investing in both Total Return and High Yield 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 Total Return and High Yield into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Total Return Fund and High Yield Fund, you can compare the effects of market volatilities on Total Return and High Yield 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 Total Return with a short position of High Yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Total Return and High Yield.
Diversification Opportunities for Total Return and High Yield
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Total and High is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Total Return Fund and High Yield Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Yield Fund and Total Return 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 Total Return Fund are associated (or correlated) with High Yield. 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 Total Return i.e., Total Return and High Yield go up and down completely randomly.
Pair Corralation between Total Return and High Yield
Assuming the 90 days horizon Total Return is expected to generate 1.59 times less return on investment than High Yield. In addition to that, Total Return is 1.46 times more volatile than High Yield Fund. It trades about 0.06 of its total potential returns per unit of risk. High Yield Fund is currently generating about 0.13 per unit of volatility. If you would invest 679.00 in High Yield Fund on April 1, 2025 and sell it today you would earn a total of 132.00 from holding High Yield Fund or generate 19.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Total Return Fund vs. High Yield Fund
Performance |
| Timeline |
| Total Return |
| High Yield Fund |
Total Return and High Yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Total Return and High Yield
The main advantage of trading using opposite Total Return and High Yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Total Return position performs unexpectedly, High Yield 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 will offset losses from the drop in High Yield's long position.| Total Return vs. Invesco Technology Fund | Total Return vs. Dreyfus Technology Growth | Total Return vs. Goldman Sachs Technology | Total Return vs. Janus Global Technology |
| High Yield vs. Emerging Markets Bond | High Yield vs. Pimco Foreign Bond | High Yield vs. Real Return Fund | High Yield vs. Low Duration Fund |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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