Correlation Between HIGH YIELD and SSGA SP

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Can any of the company-specific risk be diversified away by investing in both HIGH YIELD and SSGA SP 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 SSGA SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HIGH YIELD STRATEGY and SSGA SP 500, you can compare the effects of market volatilities on HIGH YIELD and SSGA SP 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 SSGA SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of HIGH YIELD and SSGA SP.

Diversification Opportunities for HIGH YIELD and SSGA SP

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between RYHGX and SVSPX is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding HIGH YIELD STRATEGY and SSGA SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSGA SP 500 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 STRATEGY are associated (or correlated) with SSGA SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSGA SP 500 has no effect on the direction of HIGH YIELD i.e., HIGH YIELD and SSGA SP go up and down completely randomly.

Pair Corralation between HIGH YIELD and SSGA SP

Assuming the 90 days horizon HIGH YIELD STRATEGY is expected to under-perform the SSGA SP. But the mutual fund apears to be less risky and, when comparing its historical volatility, HIGH YIELD STRATEGY is 2.31 times less risky than SSGA SP. The mutual fund trades about -0.02 of its potential returns per unit of risk. The SSGA SP 500 is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  20,025  in SSGA SP 500 on October 30, 2022 and sell it today you would earn a total of  1,326  from holding SSGA SP 500 or generate 6.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

HIGH YIELD STRATEGY  vs.  SSGA SP 500

 Performance (%) 
       Timeline  
HIGH YIELD STRATEGY 
RYHGX Performance
11 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in HIGH YIELD STRATEGY are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly unfluctuating technical and fundamental indicators, HIGH YIELD may actually be approaching a critical reversion point that can send shares even higher in February 2023.

RYHGX Price Channel

SSGA SP 500 
SVSPX Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in SSGA SP 500 are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, SSGA SP may actually be approaching a critical reversion point that can send shares even higher in February 2023.

SVSPX Price Channel

HIGH YIELD and SSGA SP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HIGH YIELD and SSGA SP

The main advantage of trading using opposite HIGH YIELD and SSGA SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HIGH YIELD position performs unexpectedly, SSGA SP 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 SSGA SP will offset losses from the drop in SSGA SP's long position.
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The idea behind HIGH YIELD STRATEGY and SSGA SP 500 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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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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