Correlation Between Multisector Bond and Foreign Bond
Can any of the company-specific risk be diversified away by investing in both Multisector Bond and Foreign 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 Multisector Bond and Foreign Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Multisector Bond Sma and Foreign Bond Fund, you can compare the effects of market volatilities on Multisector Bond and Foreign 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 Multisector Bond with a short position of Foreign Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multisector Bond and Foreign Bond.
Diversification Opportunities for Multisector Bond and Foreign Bond
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Multisector and Foreign is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Multisector Bond Sma and Foreign Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foreign Bond and Multisector 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 Multisector Bond Sma are associated (or correlated) with Foreign Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foreign Bond has no effect on the direction of Multisector Bond i.e., Multisector Bond and Foreign Bond go up and down completely randomly.
Pair Corralation between Multisector Bond and Foreign Bond
Assuming the 90 days horizon Multisector Bond Sma is expected to generate 0.63 times more return on investment than Foreign Bond. However, Multisector Bond Sma is 1.59 times less risky than Foreign Bond. It trades about 0.21 of its potential returns per unit of risk. Foreign Bond Fund is currently generating about -0.06 per unit of risk. If you would invest 1,348 in Multisector Bond Sma on August 30, 2024 and sell it today you would earn a total of 19.00 from holding Multisector Bond Sma or generate 1.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Multisector Bond Sma vs. Foreign Bond Fund
Performance |
| Timeline |
| Multisector Bond Sma |
| Foreign Bond |
Multisector Bond and Foreign Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Multisector Bond and Foreign Bond
The main advantage of trading using opposite Multisector Bond and Foreign Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multisector Bond position performs unexpectedly, Foreign 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 Foreign Bond will offset losses from the drop in Foreign Bond's long position.| Multisector Bond vs. Columbia Porate Income | Multisector Bond vs. Columbia Ultra Short | Multisector Bond vs. Columbia Treasury Index | Multisector Bond vs. Columbia Small Cap |
| Foreign Bond vs. Rbc Ultra Short Fixed | Foreign Bond vs. Jhancock Short Duration | Foreign Bond vs. Rbc Short Duration | Foreign Bond vs. Astor Longshort Fund |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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