Correlation Between Strategic Income and Global Bond
Can any of the company-specific risk be diversified away by investing in both Strategic Income and Global Bond 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 Strategic Income and Global Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Strategic Income Fund and Global Bond Fund, you can compare the effects of market volatilities on Strategic Income and Global Bond 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 Strategic Income with a short position of Global Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Income and Global Bond.
Diversification Opportunities for Strategic Income and Global Bond
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Strategic and Global is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Income Fund and Global Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Bond Fund and Strategic Income 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 Strategic Income Fund are associated (or correlated) with Global Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Bond Fund has no effect on the direction of Strategic Income i.e., Strategic Income and Global Bond go up and down completely randomly.
Pair Corralation between Strategic Income and Global Bond
Assuming the 90 days horizon Strategic Income Fund is expected to under-perform the Global Bond. In addition to that, Strategic Income is 1.02 times more volatile than Global Bond Fund. It trades about -0.22 of its total potential returns per unit of risk. Global Bond Fund is currently generating about -0.2 per unit of volatility. If you would invest 892.00 in Global Bond Fund on August 28, 2024 and sell it today you would lose (15.00) from holding Global Bond Fund or give up 1.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Strategic Income Fund vs. Global Bond Fund
Performance |
| Timeline |
| Strategic Income |
| Global Bond Fund |
Strategic Income and Global Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Strategic Income and Global Bond
The main advantage of trading using opposite Strategic Income and Global Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Income position performs unexpectedly, Global Bond 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 Global Bond will offset losses from the drop in Global Bond's long position.| Strategic Income vs. Short Duration Strategic | Strategic Income vs. Short Duration Fund | Strategic Income vs. High Yield Municipal Fund | Strategic Income vs. Emerging Markets Debt |
| Global Bond vs. High Yield Fund Investor | Global Bond vs. Core Plus Fund | Global Bond vs. Diversified Bond Fund | Global Bond vs. Strategic Income Fund |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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