Correlation Between Global Fixed and Core Fixed
Can any of the company-specific risk be diversified away by investing in both Global Fixed and Core Fixed 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 Core Fixed 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 Core Fixed Income, you can compare the effects of market volatilities on Global Fixed and Core Fixed 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 Core Fixed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Fixed and Core Fixed.
Diversification Opportunities for Global Fixed and Core Fixed
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Global and Core is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Global Fixed Income and Core Fixed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Fixed Income 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 Core Fixed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Fixed Income has no effect on the direction of Global Fixed i.e., Global Fixed and Core Fixed go up and down completely randomly.
Pair Corralation between Global Fixed and Core Fixed
Assuming the 90 days horizon Global Fixed Income is expected to generate 0.52 times more return on investment than Core Fixed. However, Global Fixed Income is 1.92 times less risky than Core Fixed. It trades about 0.2 of its potential returns per unit of risk. Core Fixed Income is currently generating about 0.06 per unit of risk. If you would invest 498.00 in Global Fixed Income on September 12, 2024 and sell it today you would earn a total of 22.00 from holding Global Fixed Income or generate 4.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Fixed Income vs. Core Fixed Income
Performance |
| Timeline |
| Global Fixed Income |
| Core Fixed Income |
Global Fixed and Core Fixed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Fixed and Core Fixed
The main advantage of trading using opposite Global Fixed and Core Fixed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Fixed position performs unexpectedly, Core Fixed 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 Core Fixed will offset losses from the drop in Core Fixed's long position.| Global Fixed vs. Fidelity Advisor Diversified | Global Fixed vs. Western Asset Diversified | Global Fixed vs. Allianzgi Diversified Income | Global Fixed vs. Aqr Diversified Arbitrage |
| Core Fixed vs. Aqr Large Cap | Core Fixed vs. Cb Large Cap | Core Fixed vs. Qs Large Cap | Core Fixed vs. Lord Abbett Affiliated |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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