Correlation Between Corporate Bond and Global Advantage
Can any of the company-specific risk be diversified away by investing in both Corporate Bond and Global Advantage 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 Corporate Bond and Global Advantage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Corporate Bond Portfolio and Global Advantage Portfolio, you can compare the effects of market volatilities on Corporate Bond and Global Advantage 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 Corporate Bond with a short position of Global Advantage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Corporate Bond and Global Advantage.
Diversification Opportunities for Corporate Bond and Global Advantage
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Corporate and Global is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Corporate Bond Portfolio and Global Advantage Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Advantage Por and Corporate 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 Corporate Bond Portfolio are associated (or correlated) with Global Advantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Advantage Por has no effect on the direction of Corporate Bond i.e., Corporate Bond and Global Advantage go up and down completely randomly.
Pair Corralation between Corporate Bond and Global Advantage
Assuming the 90 days horizon Corporate Bond is expected to generate 11.53 times less return on investment than Global Advantage. But when comparing it to its historical volatility, Corporate Bond Portfolio is 4.71 times less risky than Global Advantage. It trades about 0.09 of its potential returns per unit of risk. Global Advantage Portfolio is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 1,184 in Global Advantage Portfolio on September 3, 2024 and sell it today you would earn a total of 639.00 from holding Global Advantage Portfolio or generate 53.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Corporate Bond Portfolio vs. Global Advantage Portfolio
Performance |
| Timeline |
| Corporate Bond Portfolio |
| Global Advantage Por |
Corporate Bond and Global Advantage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Corporate Bond and Global Advantage
The main advantage of trading using opposite Corporate Bond and Global Advantage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corporate Bond position performs unexpectedly, Global Advantage 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 Global Advantage will offset losses from the drop in Global Advantage's long position.| Corporate Bond vs. International Equity Portfolio | Corporate Bond vs. Royce Special Equity | Corporate Bond vs. Growth Portfolio Class | Corporate Bond vs. Small Pany Growth |
| Global Advantage vs. Morgan Stanley Multi | Global Advantage vs. Global Advantage Portfolio | Global Advantage vs. Global Opportunity Portfolio | Global Advantage vs. Global Advantage Portfolio |
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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