Correlation Between American High and Integrity High

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

By analyzing existing cross correlation between American High Income and Integrity High Income, you can compare the effects of market volatilities on American High and Integrity 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 American High with a short position of Integrity High. Check out your portfolio center. Please also check ongoing floating volatility patterns of American High and Integrity High.

Diversification Opportunities for American High and Integrity High

0.89

Correlation Coefficient

American High  Integrity High

Very poor diversification

The 3 months correlation between American and Integrity is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding American High Income and Integrity High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Integrity High Income and American 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 American High Income are associated (or correlated) with Integrity High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Integrity High Income has no effect on the direction of American High i.e., American High and Integrity High go up and down completely randomly.

Pair Corralation between American High and Integrity High

Assuming the 90 days horizon American High Income is expected to generate 0.64 times more return on investment than Integrity High. However, American High Income is 1.57 times less risky than Integrity High. It trades about 0.3 of its potential returns per unit of risk. Integrity High Income is currently generating about 0.14 per unit of risk. If you would invest  982.00  in American High Income on September 15, 2024 and sell it today you would earn a total of  7.00  from holding American High Income or generate 0.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

American High Income  vs.  Integrity High Income

American High Income

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American High Income are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, American High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Integrity High Income

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Integrity High Income are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Integrity High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American High and Integrity High

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

The idea behind American High Income and Integrity High Income 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.