Correlation Between Global Bond and Equity Index
Can any of the company-specific risk be diversified away by investing in both Global Bond and Equity Index 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 Bond and Equity Index into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Bond Fund and Equity Index Investor, you can compare the effects of market volatilities on Global Bond and Equity Index 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 Bond with a short position of Equity Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Bond and Equity Index.
Diversification Opportunities for Global Bond and Equity Index
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Global and Equity is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Global Bond Fund and Equity Index Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Index Investor and Global Bond 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 Bond Fund are associated (or correlated) with Equity Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Index Investor has no effect on the direction of Global Bond i.e., Global Bond and Equity Index go up and down completely randomly.
Pair Corralation between Global Bond and Equity Index
Assuming the 90 days horizon Global Bond is expected to generate 7.86 times less return on investment than Equity Index. But when comparing it to its historical volatility, Global Bond Fund is 2.41 times less risky than Equity Index. It trades about 0.04 of its potential returns per unit of risk. Equity Index Investor is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 3,997 in Equity Index Investor on August 28, 2024 and sell it today you would earn a total of 2,122 from holding Equity Index Investor or generate 53.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Bond Fund vs. Equity Index Investor
Performance |
| Timeline |
| Global Bond Fund |
| Equity Index Investor |
Global Bond and Equity Index Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Bond and Equity Index
The main advantage of trading using opposite Global Bond and Equity Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Bond position performs unexpectedly, Equity Index 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 Equity Index will offset losses from the drop in Equity Index's long position.| Global Bond vs. Growth Allocation Fund | Global Bond vs. Defensive Market Strategies | Global Bond vs. Defensive Market Strategies | Global Bond vs. Value Equity Institutional |
| Equity Index vs. Growth Equity Investor | Equity Index vs. Value Equity Investor | Equity Index vs. Small Cap Equity | Equity Index vs. International Equity Investor |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Equity Valuation Check real value of public entities based on technical and fundamental data |