Correlation Between Bond Fund and Income Fund
Can any of the company-specific risk be diversified away by investing in both Bond Fund and Income Fund 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 Bond Fund and Income Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bond Fund Of and Income Fund Of, you can compare the effects of market volatilities on Bond Fund and Income Fund 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 Bond Fund with a short position of Income Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bond Fund and Income Fund.
Diversification Opportunities for Bond Fund and Income Fund
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bond and Income is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Bond Fund Of and Income Fund Of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Income Fund and Bond Fund 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 Bond Fund Of are associated (or correlated) with Income Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Income Fund has no effect on the direction of Bond Fund i.e., Bond Fund and Income Fund go up and down completely randomly.
Pair Corralation between Bond Fund and Income Fund
Assuming the 90 days horizon Bond Fund is expected to generate 4.17 times less return on investment than Income Fund. But when comparing it to its historical volatility, Bond Fund Of is 1.17 times less risky than Income Fund. It trades about 0.02 of its potential returns per unit of risk. Income Fund Of is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,129 in Income Fund Of on September 12, 2024 and sell it today you would earn a total of 471.00 from holding Income Fund Of or generate 22.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Bond Fund Of vs. Income Fund Of
Performance |
| Timeline |
| Bond Fund |
| Income Fund |
Bond Fund and Income Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bond Fund and Income Fund
The main advantage of trading using opposite Bond Fund and Income Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bond Fund position performs unexpectedly, Income Fund 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 Income Fund will offset losses from the drop in Income Fund's long position.| Bond Fund vs. Msift High Yield | Bond Fund vs. Blackrock High Yield | Bond Fund vs. Alpine High Yield | Bond Fund vs. Fidelity Capital Income |
| Income Fund vs. Capital Income Builder | Income Fund vs. Capital World Growth | Income Fund vs. American Balanced | Income Fund vs. American Funds Fundamental |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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