Correlation Between Growth Allocation and Global Bond
Can any of the company-specific risk be diversified away by investing in both Growth Allocation and Global Bond 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 Growth Allocation and Global Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Allocation Fund and Global Bond Fund, you can compare the effects of market volatilities on Growth Allocation and Global Bond 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 Growth Allocation with a short position of Global Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Allocation and Global Bond.
Diversification Opportunities for Growth Allocation and Global Bond
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Growth and Global is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Growth Allocation Fund and Global Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Bond Fund and Growth Allocation 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 Growth Allocation Fund are associated (or correlated) with Global Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Bond Fund has no effect on the direction of Growth Allocation i.e., Growth Allocation and Global Bond go up and down completely randomly.
Pair Corralation between Growth Allocation and Global Bond
Assuming the 90 days horizon Growth Allocation Fund is expected to generate 2.01 times more return on investment than Global Bond. However, Growth Allocation is 2.01 times more volatile than Global Bond Fund. It trades about 0.09 of its potential returns per unit of risk. Global Bond Fund is currently generating about 0.04 per unit of risk. If you would invest 1,156 in Growth Allocation Fund on November 3, 2024 and sell it today you would earn a total of 146.00 from holding Growth Allocation Fund or generate 12.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Allocation Fund vs. Global Bond Fund
Performance |
| Timeline |
| Growth Allocation |
| Global Bond Fund |
Growth Allocation and Global Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Allocation and Global Bond
The main advantage of trading using opposite Growth Allocation and Global Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Allocation position performs unexpectedly, Global Bond 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 Bond will offset losses from the drop in Global Bond's long position.| Growth Allocation vs. Stone Ridge Diversified | Growth Allocation vs. Guidepath Conservative Income | Growth Allocation vs. Allianzgi Diversified Income | Growth Allocation vs. Tax Free Conservative Income |
| Global Bond vs. Global Diversified Income | Global Bond vs. Lord Abbett Diversified | Global Bond vs. Delaware Limited Term Diversified | Global Bond vs. Calvert Conservative Allocation |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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