Correlation Between High Yield and Swan Defined

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

By analyzing existing cross correlation between High Yield Municipal Fund and Swan Defined Risk, you can compare the effects of market volatilities on High Yield and Swan Defined 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 Swan Defined. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Yield and Swan Defined.

Diversification Opportunities for High Yield and Swan Defined

0.66

Correlation Coefficient

High Yield  Swan Defined

Poor diversification

The 3 months correlation between High and Swan is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund and Swan Defined Risk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swan Defined Risk 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 Municipal Fund are associated (or correlated) with Swan Defined. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swan Defined Risk has no effect on the direction of High Yield i.e., High Yield and Swan Defined go up and down completely randomly.

Pair Corralation between High Yield and Swan Defined

Assuming the 90 days horizon High Yield is expected to generate 2.67 times less return on investment than Swan Defined. But when comparing it to its historical volatility, High Yield Municipal Fund is 3.21 times less risky than Swan Defined. It trades about 0.14 of its potential returns per unit of risk. Swan Defined Risk is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,561  in Swan Defined Risk on September 11, 2025 and sell it today you would earn a total of  53.00  from holding Swan Defined Risk or generate 3.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

High Yield Municipal Fund  vs.  Swan Defined Risk

High Yield Municipal

Risk-Adjusted Performance

Good

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

Swan Defined Risk

Risk-Adjusted Performance

Fair

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

Pair Trading with High Yield and Swan Defined

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

The idea behind High Yield Municipal Fund and Swan Defined Risk 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.

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.