Correlation Between Medium-duration Bond and International Equity
Can any of the company-specific risk be diversified away by investing in both Medium-duration Bond 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 Medium-duration Bond and International Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Medium Duration Bond Institutional and International Equity Institutional, you can compare the effects of market volatilities on Medium-duration Bond 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 Medium-duration Bond with a short position of International Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medium-duration Bond and International Equity.
Diversification Opportunities for Medium-duration Bond and International Equity
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Medium-duration and International is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Medium Duration Bond Instituti and International Equity Instituti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equity and Medium-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 Medium Duration Bond Institutional 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 Medium-duration Bond i.e., Medium-duration Bond and International Equity go up and down completely randomly.
Pair Corralation between Medium-duration Bond and International Equity
Assuming the 90 days horizon Medium Duration Bond Institutional is expected to generate 0.49 times more return on investment than International Equity. However, Medium Duration Bond Institutional is 2.05 times less risky than International Equity. It trades about 0.06 of its potential returns per unit of risk. International Equity Institutional is currently generating about -0.05 per unit of risk. If you would invest 1,271 in Medium Duration Bond Institutional on September 3, 2024 and sell it today you would earn a total of 5.00 from holding Medium Duration Bond Institutional or generate 0.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Medium Duration Bond Instituti vs. International Equity Instituti
Performance |
| Timeline |
| Medium Duration Bond |
| International Equity |
Medium-duration Bond and International Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Medium-duration Bond and International Equity
The main advantage of trading using opposite Medium-duration Bond and International Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medium-duration Bond 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.| Medium-duration Bond vs. Qs Large Cap | Medium-duration Bond vs. Jhancock Disciplined Value | Medium-duration Bond vs. Qs Large Cap | Medium-duration Bond vs. Dunham Large Cap |
| International Equity vs. Mirova Global Green | International Equity vs. Rbb Fund | International Equity vs. Qs Large Cap | International Equity vs. Principal Lifetime Hybrid |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
Other Complementary Tools
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings |