Correlation Between Global Fixed and Real Assets
Can any of the company-specific risk be diversified away by investing in both Global Fixed and Real Assets 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 Global Fixed and Real Assets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Fixed Income and Real Assets Portfolio, you can compare the effects of market volatilities on Global Fixed and Real Assets 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 Global Fixed with a short position of Real Assets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Fixed and Real Assets.
Diversification Opportunities for Global Fixed and Real Assets
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Global and Real is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Global Fixed Income and Real Assets Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Assets Portfolio and Global Fixed 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 Global Fixed Income are associated (or correlated) with Real Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Assets Portfolio has no effect on the direction of Global Fixed i.e., Global Fixed and Real Assets go up and down completely randomly.
Pair Corralation between Global Fixed and Real Assets
Assuming the 90 days horizon Global Fixed is expected to generate 2.58 times less return on investment than Real Assets. But when comparing it to its historical volatility, Global Fixed Income is 2.59 times less risky than Real Assets. It trades about 0.28 of its potential returns per unit of risk. Real Assets Portfolio is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 1,097 in Real Assets Portfolio on September 14, 2024 and sell it today you would earn a total of 22.00 from holding Real Assets Portfolio or generate 2.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Fixed Income vs. Real Assets Portfolio
Performance |
| Timeline |
| Global Fixed Income |
| Real Assets Portfolio |
Global Fixed and Real Assets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Fixed and Real Assets
The main advantage of trading using opposite Global Fixed and Real Assets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Fixed position performs unexpectedly, Real Assets 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 Real Assets will offset losses from the drop in Real Assets' long position.| Global Fixed vs. Emerging Markets Equity | Global Fixed vs. Global Fixed Income | Global Fixed vs. Global Fixed Income | Global Fixed vs. Global E Portfolio |
| Real Assets vs. Emerging Markets Equity | Real Assets vs. Global Fixed Income | Real Assets vs. Global Fixed Income | Real Assets vs. Global Fixed Income |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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