Correlation Between Global Bond and Fixed Income
Can any of the company-specific risk be diversified away by investing in both Global Bond and Fixed Income 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 Fixed Income 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 Fixed Income Shares, you can compare the effects of market volatilities on Global Bond and Fixed Income 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 Fixed Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Bond and Fixed Income.
Diversification Opportunities for Global Bond and Fixed Income
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Global and Fixed is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Global Bond Fund and Fixed Income Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fixed Income Shares 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 Fixed Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fixed Income Shares has no effect on the direction of Global Bond i.e., Global Bond and Fixed Income go up and down completely randomly.
Pair Corralation between Global Bond and Fixed Income
Assuming the 90 days horizon Global Bond is expected to generate 2.15 times less return on investment than Fixed Income. But when comparing it to its historical volatility, Global Bond Fund is 1.67 times less risky than Fixed Income. It trades about 0.12 of its potential returns per unit of risk. Fixed Income Shares is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 835.00 in Fixed Income Shares on September 3, 2024 and sell it today you would earn a total of 43.00 from holding Fixed Income Shares or generate 5.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Bond Fund vs. Fixed Income Shares
Performance |
| Timeline |
| Global Bond Fund |
| Fixed Income Shares |
Global Bond and Fixed Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Bond and Fixed Income
The main advantage of trading using opposite Global Bond and Fixed Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Bond position performs unexpectedly, Fixed Income 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 Fixed Income will offset losses from the drop in Fixed Income's long position.| Global Bond vs. Ab Bond Inflation | Global Bond vs. Ab Bond Inflation | Global Bond vs. Blackrock Inflation Protected | Global Bond vs. Oklahoma College Savings |
| Fixed Income vs. Qs Large Cap | Fixed Income vs. Jhancock Disciplined Value | Fixed Income vs. Dodge Cox Stock | Fixed Income vs. Tax Managed Large Cap |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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