Correlation Between PBDM and PBND
Can any of the company-specific risk be diversified away by investing in both PBDM and PBND 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 PBDM and PBND into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PBDM and PBND, you can compare the effects of market volatilities on PBDM and PBND 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 PBDM with a short position of PBND. Check out your portfolio center. Please also check ongoing floating volatility patterns of PBDM and PBND.
Diversification Opportunities for PBDM and PBND
Significant diversification
The 3 months correlation between PBDM and PBND is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding PBDM and PBND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PBND and PBDM 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 PBDM are associated (or correlated) with PBND. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PBND has no effect on the direction of PBDM i.e., PBDM and PBND go up and down completely randomly.
Pair Corralation between PBDM and PBND
If you would invest 2,177 in PBND on August 25, 2024 and sell it today you would earn a total of 0.00 from holding PBND or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 50.0% |
| Values | Daily Returns |
PBDM vs. PBND
Performance |
| Timeline |
| PBDM |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| PBND |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
PBDM and PBND Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PBDM and PBND
The main advantage of trading using opposite PBDM and PBND positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PBDM position performs unexpectedly, PBND 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 PBND will offset losses from the drop in PBND's long position.| PBDM vs. Dimensional Core Equity | PBDM vs. Dimensional Emerging Core | PBDM vs. Dimensional Targeted Value | PBDM vs. Dimensional Small Cap |
| PBND vs. Invesco PureBeta 0 5 | PBND vs. Invesco PureBeta MSCI | PBND vs. Aquagold International | PBND vs. Morningstar Unconstrained Allocation |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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