Can any of the company-specific risk be diversified away by investing in both Ab High and Calvert High 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 Ab High and Calvert High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ab High Income and Calvert High Yield, you can compare the effects of market volatilities on Ab High and Calvert High 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 Ab High with a short position of Calvert High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab High and Calvert High.
Diversification Opportunities for Ab High and Calvert High
The 3 months correlation between AGDRX and Calvert is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Ab High Income and Calvert High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calvert High Yield and Ab High 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 Ab High Income are associated (or correlated) with Calvert High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calvert High Yield has no effect on the direction of Ab High i.e., Ab High and Calvert High go up and down completely randomly.
Assuming the 90 days horizon Ab High is expected to generate 1.25 times less return on investment than Calvert High. But when comparing it to its historical volatility, Ab High Income is 1.07 times less risky than Calvert High. It trades about 0.09 of its potential returns per unit of risk. Calvert High Yield is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,411 in Calvert High Yield on March 6, 2024 and sell it today you would earn a total of 31.00 from holding Calvert High Yield or generate 1.29% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Ab High Income are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ab High is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
Compared to the overall equity markets, risk-adjusted returns on investments in Calvert High Yield are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Calvert High is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.