Correlation Between Diversified Bond and Global Bond
Can any of the company-specific risk be diversified away by investing in both Diversified Bond 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 Diversified Bond and Global Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diversified Bond Fund and Global Bond Fund, you can compare the effects of market volatilities on Diversified Bond 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 Diversified Bond with a short position of Global Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diversified Bond and Global Bond.
Diversification Opportunities for Diversified Bond and Global Bond
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Diversified and Global is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Diversified Bond 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 Diversified Bond 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 Diversified Bond 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 Diversified Bond i.e., Diversified Bond and Global Bond go up and down completely randomly.
Pair Corralation between Diversified Bond and Global Bond
Assuming the 90 days horizon Diversified Bond is expected to generate 1.85 times less return on investment than Global Bond. In addition to that, Diversified Bond is 1.38 times more volatile than Global Bond Fund. It trades about 0.02 of its total potential returns per unit of risk. Global Bond Fund is currently generating about 0.05 per unit of volatility. If you would invest 828.00 in Global Bond Fund on August 27, 2024 and sell it today you would earn a total of 49.00 from holding Global Bond Fund or generate 5.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diversified Bond Fund vs. Global Bond Fund
Performance |
| Timeline |
| Diversified Bond |
| Global Bond Fund |
Diversified Bond and Global Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diversified Bond and Global Bond
The main advantage of trading using opposite Diversified Bond and Global Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diversified Bond 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.| Diversified Bond vs. Mid Cap Value | Diversified Bond vs. Equity Growth Fund | Diversified Bond vs. Income Growth Fund | Diversified Bond vs. Emerging Markets Fund |
| 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
Other Complementary Tools
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Global Correlations Find global opportunities by holding instruments from different markets |