Correlation Between Diversified Bond and Global Growth
Can any of the company-specific risk be diversified away by investing in both Diversified Bond and Global 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 Global 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 Global Growth Fund, you can compare the effects of market volatilities on Diversified Bond and Global 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 Global Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diversified Bond and Global Growth.
Diversification Opportunities for Diversified Bond and Global Growth
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Diversified and Global is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Diversified Bond Fund and Global Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global 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 Global Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Growth has no effect on the direction of Diversified Bond i.e., Diversified Bond and Global Growth go up and down completely randomly.
Pair Corralation between Diversified Bond and Global Growth
Assuming the 90 days horizon Diversified Bond is expected to generate 3.67 times less return on investment than Global Growth. But when comparing it to its historical volatility, Diversified Bond Fund is 2.31 times less risky than Global Growth. It trades about 0.02 of its potential returns per unit of risk. Global Growth Fund is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,072 in Global Growth Fund on September 2, 2024 and sell it today you would earn a total of 189.00 from holding Global Growth Fund or generate 17.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diversified Bond Fund vs. Global Growth Fund
Performance |
| Timeline |
| Diversified Bond |
| Global Growth |
Diversified Bond and Global Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diversified Bond and Global Growth
The main advantage of trading using opposite Diversified Bond and Global Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diversified Bond position performs unexpectedly, Global 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 Global Growth will offset losses from the drop in Global Growth's long position.| Diversified Bond vs. Jp Morgan Smartretirement | Diversified Bond vs. Calvert Moderate Allocation | Diversified Bond vs. American Funds Retirement | Diversified Bond vs. Franklin Lifesmart Retirement |
| Global Growth vs. Mid Cap Value | Global Growth vs. Equity Growth Fund | Global Growth vs. Income Growth Fund | Global Growth vs. Diversified Bond 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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