Correlation Between Sp 500 and High Income
Can any of the company-specific risk be diversified away by investing in both Sp 500 and High Income 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 Sp 500 and High Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sp 500 Index and High Income Fund, you can compare the effects of market volatilities on Sp 500 and High Income 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 Sp 500 with a short position of High Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp 500 and High Income.
Diversification Opportunities for Sp 500 and High Income
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between USPRX and High is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Sp 500 Index and High Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Income Fund and Sp 500 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 Sp 500 Index are associated (or correlated) with High Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Income Fund has no effect on the direction of Sp 500 i.e., Sp 500 and High Income go up and down completely randomly.
Pair Corralation between Sp 500 and High Income
Assuming the 90 days horizon Sp 500 Index is expected to generate 5.17 times more return on investment than High Income. However, Sp 500 is 5.17 times more volatile than High Income Fund. It trades about 0.21 of its potential returns per unit of risk. High Income Fund is currently generating about 0.34 per unit of risk. If you would invest 7,345 in Sp 500 Index on May 14, 2025 and sell it today you would earn a total of 626.00 from holding Sp 500 Index or generate 8.52% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 98.39% |
Values | Daily Returns |
Sp 500 Index vs. High Income Fund
Performance |
Timeline |
Sp 500 Index |
High Income Fund |
Sp 500 and High Income Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Sp 500 and High Income
The main advantage of trading using opposite Sp 500 and High Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp 500 position performs unexpectedly, High Income 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 Income will offset losses from the drop in High Income's long position.Sp 500 vs. Lord Abbett Diversified | Sp 500 vs. Wells Fargo Diversified | Sp 500 vs. Allianzgi Diversified Income | Sp 500 vs. American Century Diversified |
High Income vs. High Yield Fund A | High Income vs. High Yield Fund R | High Income vs. High Yield Fund Y | High Income vs. High Yield Fund I |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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