Correlation Between Global Fixed and International Equity
Can any of the company-specific risk be diversified away by investing in both Global Fixed and International Equity 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 International Equity 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 International Equity Fund, you can compare the effects of market volatilities on Global Fixed and International Equity 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 International Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Fixed and International Equity.
Diversification Opportunities for Global Fixed and International Equity
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Global and International is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Global Fixed Income and International Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equity 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 International Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Equity has no effect on the direction of Global Fixed i.e., Global Fixed and International Equity go up and down completely randomly.
Pair Corralation between Global Fixed and International Equity
Assuming the 90 days horizon Global Fixed Income is expected to generate 0.16 times more return on investment than International Equity. However, Global Fixed Income is 6.24 times less risky than International Equity. It trades about 0.06 of its potential returns per unit of risk. International Equity Fund is currently generating about -0.12 per unit of risk. If you would invest 515.00 in Global Fixed Income on September 4, 2024 and sell it today you would earn a total of 3.00 from holding Global Fixed Income or generate 0.58% 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. International Equity Fund
Performance |
| Timeline |
| Global Fixed Income |
| International Equity |
Global Fixed and International Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Fixed and International Equity
The main advantage of trading using opposite Global Fixed and International Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Fixed position performs unexpectedly, International Equity 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 Equity will offset losses from the drop in International Equity's long position.| Global Fixed vs. Emerging Markets Equity | Global Fixed vs. Global Fixed Income | Global Fixed vs. Global E Portfolio | Global Fixed vs. Global E Portfolio |
| International Equity vs. Emerging Markets Equity | International Equity vs. Global Fixed Income | International Equity vs. Global Fixed Income | International Equity 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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