Correlation Between Diversified Bond and International Growth
Can any of the company-specific risk be diversified away by investing in both Diversified Bond and International Growth 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 International Growth 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 International Growth Fund, you can compare the effects of market volatilities on Diversified Bond and International Growth 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 International Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diversified Bond and International Growth.
Diversification Opportunities for Diversified Bond and International Growth
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Diversified and International is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Diversified Bond Fund and International Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Growth 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 International Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Growth has no effect on the direction of Diversified Bond i.e., Diversified Bond and International Growth go up and down completely randomly.
Pair Corralation between Diversified Bond and International Growth
Assuming the 90 days horizon Diversified Bond Fund is expected to generate 0.46 times more return on investment than International Growth. However, Diversified Bond Fund is 2.2 times less risky than International Growth. It trades about 0.08 of its potential returns per unit of risk. International Growth Fund is currently generating about -0.13 per unit of risk. If you would invest 914.00 in Diversified Bond Fund on August 30, 2024 and sell it today you would earn a total of 6.00 from holding Diversified Bond Fund or generate 0.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diversified Bond Fund vs. International Growth Fund
Performance |
| Timeline |
| Diversified Bond |
| International Growth |
Diversified Bond and International Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diversified Bond and International Growth
The main advantage of trading using opposite Diversified Bond and International Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diversified Bond position performs unexpectedly, International Growth 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 International Growth will offset losses from the drop in International Growth's long position.| Diversified Bond vs. Icon Natural Resources | Diversified Bond vs. Firsthand Alternative Energy | Diversified Bond vs. Gamco Natural Resources | Diversified Bond vs. Calvert Global Energy |
| International Growth vs. Europacific Growth Fund | International Growth vs. Europacific Growth Fund | International Growth vs. Europacific Growth Fund | International Growth vs. Europacific Growth 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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