Correlation Between Long-term and Global Bond
Can any of the company-specific risk be diversified away by investing in both Long-term and Global 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 Long-term and Global Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Long Term Government Fund and Global Bond Fund, you can compare the effects of market volatilities on Long-term and Global 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 Long-term with a short position of Global Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Long-term and Global Bond.
Diversification Opportunities for Long-term and Global Bond
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Long-term and Global is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Long Term Government Fund and Global Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Bond Fund and Long-term 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 Long Term Government Fund are associated (or correlated) with Global Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Bond Fund has no effect on the direction of Long-term i.e., Long-term and Global Bond go up and down completely randomly.
Pair Corralation between Long-term and Global Bond
Assuming the 90 days horizon Long Term Government Fund is expected to generate 62.73 times more return on investment than Global Bond. However, Long-term is 62.73 times more volatile than Global Bond Fund. It trades about 0.03 of its potential returns per unit of risk. Global Bond Fund is currently generating about 0.1 per unit of risk. If you would invest 1,513 in Long Term Government Fund on August 31, 2024 and sell it today you would lose (74.00) from holding Long Term Government Fund or give up 4.89% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Long Term Government Fund vs. Global Bond Fund
Performance |
| Timeline |
| Long Term Government |
| Global Bond Fund |
Long-term and Global Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Long-term and Global Bond
The main advantage of trading using opposite Long-term and Global Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Long-term position performs unexpectedly, Global 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 Global Bond will offset losses from the drop in Global Bond's long position.| Long-term vs. Jhancock Real Estate | Long-term vs. Commonwealth Real Estate | Long-term vs. Msif Real Estate | Long-term vs. Simt Real Estate |
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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