Correlation Between PBND and PBSM
Can any of the company-specific risk be diversified away by investing in both PBND and PBSM 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 PBND and PBSM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PBND and PBSM, you can compare the effects of market volatilities on PBND and PBSM 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 PBND with a short position of PBSM. Check out your portfolio center. Please also check ongoing floating volatility patterns of PBND and PBSM.
Diversification Opportunities for PBND and PBSM
Significant diversification
The 3 months correlation between PBND and PBSM is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding PBND and PBSM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PBSM and PBND 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 PBND are associated (or correlated) with PBSM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PBSM has no effect on the direction of PBND i.e., PBND and PBSM go up and down completely randomly.
Pair Corralation between PBND and PBSM
If you would invest 3,192 in PBSM on August 28, 2024 and sell it today you would earn a total of 0.00 from holding PBSM or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PBND vs. PBSM
Performance |
| Timeline |
| PBND |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| PBSM |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
PBND and PBSM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PBND and PBSM
The main advantage of trading using opposite PBND and PBSM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PBND position performs unexpectedly, PBSM 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 PBSM will offset losses from the drop in PBSM's long position.| 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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