Correlation Between Global Bond and Government Bond
Can any of the company-specific risk be diversified away by investing in both Global Bond and Government 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 Global Bond and Government Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Bond Fund and Government Bond Fund, you can compare the effects of market volatilities on Global Bond and Government 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 Global Bond with a short position of Government Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Bond and Government Bond.
Diversification Opportunities for Global Bond and Government Bond
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Global and Government is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Global Bond Fund and Government Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Government Bond and Global 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 Global Bond Fund are associated (or correlated) with Government Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Government Bond has no effect on the direction of Global Bond i.e., Global Bond and Government Bond go up and down completely randomly.
Pair Corralation between Global Bond and Government Bond
Assuming the 90 days horizon Global Bond Fund is expected to generate 0.52 times more return on investment than Government Bond. However, Global Bond Fund is 1.91 times less risky than Government Bond. It trades about 0.1 of its potential returns per unit of risk. Government Bond Fund is currently generating about 0.02 per unit of risk. If you would invest 879.00 in Global Bond Fund on August 30, 2024 and sell it today you would earn a total of 77.00 from holding Global Bond Fund or generate 8.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Bond Fund vs. Government Bond Fund
Performance |
| Timeline |
| Global Bond Fund |
| Government Bond |
Global Bond and Government Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Bond and Government Bond
The main advantage of trading using opposite Global Bond and Government Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Bond position performs unexpectedly, Government 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 Government Bond will offset losses from the drop in Government Bond's long position.| Global Bond vs. Goldman Sachs Technology | Global Bond vs. Firsthand Technology Opportunities | Global Bond vs. Allianzgi Technology Fund | Global Bond vs. Mfs Technology Fund |
| Government Bond vs. Versatile Bond Portfolio | Government Bond vs. Ambrus Core Bond | Government Bond vs. Ms Global Fixed | Government Bond vs. Blrc Sgy Mnp |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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