Correlation Between Low-duration Bond and Defensive Market
Can any of the company-specific risk be diversified away by investing in both Low-duration Bond and Defensive Market 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 Low-duration Bond and Defensive Market into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Low Duration Bond Institutional and Defensive Market Strategies, you can compare the effects of market volatilities on Low-duration Bond and Defensive Market 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 Low-duration Bond with a short position of Defensive Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Low-duration Bond and Defensive Market.
Diversification Opportunities for Low-duration Bond and Defensive Market
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Low-duration and Defensive is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Low Duration Bond Institutiona and Defensive Market Strategies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defensive Market Str and Low-duration 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 Low Duration Bond Institutional are associated (or correlated) with Defensive Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defensive Market Str has no effect on the direction of Low-duration Bond i.e., Low-duration Bond and Defensive Market go up and down completely randomly.
Pair Corralation between Low-duration Bond and Defensive Market
Assuming the 90 days horizon Low-duration Bond is expected to generate 5.9 times less return on investment than Defensive Market. But when comparing it to its historical volatility, Low Duration Bond Institutional is 5.44 times less risky than Defensive Market. It trades about 0.23 of its potential returns per unit of risk. Defensive Market Strategies is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 1,168 in Defensive Market Strategies on November 3, 2024 and sell it today you would earn a total of 27.00 from holding Defensive Market Strategies or generate 2.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Low Duration Bond Institutiona vs. Defensive Market Strategies
Performance |
| Timeline |
| Low Duration Bond |
| Defensive Market Str |
Low-duration Bond and Defensive Market Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Low-duration Bond and Defensive Market
The main advantage of trading using opposite Low-duration Bond and Defensive Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Low-duration Bond position performs unexpectedly, Defensive Market 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 Defensive Market will offset losses from the drop in Defensive Market's long position.| Low-duration Bond vs. Pimco Energy Tactical | Low-duration Bond vs. Oil Gas Ultrasector | Low-duration Bond vs. Tortoise Energy Independence | Low-duration Bond vs. Alpsalerian Energy Infrastructure |
| Defensive Market vs. Specialized Technology Fund | Defensive Market vs. Hennessy Technology Fund | Defensive Market vs. Global Technology Portfolio | Defensive Market vs. Towpath Technology |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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