Correlation Between Global Fixed and High Yield

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

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

Diversification Opportunities for Global Fixed and High Yield

0.03

Correlation Coefficient

Global Fixed  High Yield

Significant diversification

The 3 months correlation between Global and High is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Global Fixed Income and High Yield Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Yield Portfolio and Global Fixed 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 Global Fixed Income 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 Portfolio has no effect on the direction of Global Fixed i.e., Global Fixed and High Yield go up and down completely randomly.

Pair Corralation between Global Fixed and High Yield

Assuming the 90 days horizon Global Fixed Income is expected to under-perform the High Yield. But the mutual fund apears to be less risky and, when comparing its historical volatility, Global Fixed Income is 1.14 times less risky than High Yield. The mutual fund trades about -0.08 of its potential returns per unit of risk. The High Yield Portfolio is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  856.00  in High Yield Portfolio on September 16, 2025 and sell it today you would lose (5.00) from holding High Yield Portfolio or give up 0.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	84.38%
Values	Daily Returns

Global Fixed Income  vs.  High Yield Portfolio

Global Fixed Income

Risk-Adjusted Performance

Weakest

Over the last 90 days Global Fixed Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Global Fixed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

High Yield Portfolio

Risk-Adjusted Performance

Weakest

Over the last 90 days High Yield Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, High Yield is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global Fixed and High Yield

The main advantage of trading using opposite Global Fixed and High Yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Fixed 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.

The idea behind Global Fixed Income and High Yield Portfolio 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.