Correlation Between Target Managed and High Income

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

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

Diversification Opportunities for Target Managed and High Income

0.49

Correlation Coefficient

Target Managed  High Income

Very weak diversification

The 3 months correlation between Target and High is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Target Managed Allocation 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 Target Managed 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 Target Managed Allocation 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 Target Managed i.e., Target Managed and High Income go up and down completely randomly.

Pair Corralation between Target Managed and High Income

Assuming the 90 days horizon Target Managed Allocation is expected to generate 3.42 times more return on investment than High Income. However, Target Managed is 3.42 times more volatile than High Income Fund. It trades about 0.23 of its potential returns per unit of risk. High Income Fund is currently generating about 0.43 per unit of risk. If you would invest  1,039  in Target Managed Allocation on May 1, 2025 and sell it today you would earn a total of  75.00  from holding Target Managed Allocation or generate 7.22% return on investment over 90 days.

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

Target Managed Allocation  vs.  High Income Fund

Target Managed Allocation

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Target Managed Allocation are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Target Managed may actually be approaching a critical reversion point that can send shares even higher in August 2025.

High Income Fund

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in High Income Fund are ranked lower than 33 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, High Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Target Managed and High Income

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

The idea behind Target Managed Allocation and High Income Fund 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.