Correlation Between Global Bond and Foreign Bond
Can any of the company-specific risk be diversified away by investing in both Global Bond and Foreign 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 Foreign 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 Foreign Bond Fund, you can compare the effects of market volatilities on Global Bond and Foreign 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 Foreign Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Bond and Foreign Bond.
Diversification Opportunities for Global Bond and Foreign Bond
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Global and Foreign is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Global Bond Fund and Foreign Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foreign 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 Foreign Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foreign Bond has no effect on the direction of Global Bond i.e., Global Bond and Foreign Bond go up and down completely randomly.
Pair Corralation between Global Bond and Foreign Bond
Assuming the 90 days horizon Global Bond Fund is expected to generate 0.5 times more return on investment than Foreign Bond. However, Global Bond Fund is 2.0 times less risky than Foreign Bond. It trades about 0.1 of its potential returns per unit of risk. Foreign Bond Fund is currently generating about 0.02 per unit of risk. If you would invest 866.00 in Global Bond Fund on August 31, 2024 and sell it today you would earn a total of 90.00 from holding Global Bond Fund or generate 10.39% 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. Foreign Bond Fund
Performance |
| Timeline |
| Global Bond Fund |
| Foreign Bond |
Global Bond and Foreign Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Bond and Foreign Bond
The main advantage of trading using opposite Global Bond and Foreign Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Bond position performs unexpectedly, Foreign 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 Foreign Bond will offset losses from the drop in Foreign Bond's long position.| Global Bond vs. Columbia Real Estate | Global Bond vs. Jhancock Real Estate | Global Bond vs. Forum Real Estate | Global Bond vs. Goldman Sachs Real |
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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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