Correlation Between Pro Blend and Core Bond
Can any of the company-specific risk be diversified away by investing in both Pro Blend and Core 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 Pro Blend and Core Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pro Blend Extended Term and Core Bond Series, you can compare the effects of market volatilities on Pro Blend and Core 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 Pro Blend with a short position of Core Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pro Blend and Core Bond.
Diversification Opportunities for Pro Blend and Core Bond
Very poor diversification
The 3 months correlation between Pro and Core is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Pro Blend Extended Term and Core Bond Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Bond Series and Pro Blend 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 Pro Blend Extended Term are associated (or correlated) with Core Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Bond Series has no effect on the direction of Pro Blend i.e., Pro Blend and Core Bond go up and down completely randomly.
Pair Corralation between Pro Blend and Core Bond
Assuming the 90 days horizon Pro Blend Extended Term is expected to generate 0.62 times more return on investment than Core Bond. However, Pro Blend Extended Term is 1.61 times less risky than Core Bond. It trades about 0.09 of its potential returns per unit of risk. Core Bond Series is currently generating about 0.02 per unit of risk. If you would invest 1,648 in Pro Blend Extended Term on November 19, 2024 and sell it today you would earn a total of 355.00 from holding Pro Blend Extended Term or generate 21.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pro Blend Extended Term vs. Core Bond Series
Performance |
| Timeline |
| Pro Blend Extended |
| Core Bond Series |
Pro Blend and Core Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pro Blend and Core Bond
The main advantage of trading using opposite Pro Blend and Core Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pro Blend position performs unexpectedly, Core 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 Core Bond will offset losses from the drop in Core Bond's long position.| Pro Blend vs. Pro Blend Moderate Term | Pro Blend vs. Pro Blend Maximum Term | Pro Blend vs. Pro Blend Servative Term | Pro Blend vs. Madison Mid Cap |
| Core Bond vs. Elfun Government Money | Core Bond vs. Blackrock Exchange Portfolio | Core Bond vs. Franklin Government Money | Core Bond vs. Dws Government Money |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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