Correlation Between Global Bond and Total Return
Can any of the company-specific risk be diversified away by investing in both Global Bond and Total Return 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 Total Return 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 Total Return Fund, you can compare the effects of market volatilities on Global Bond and Total Return 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 Total Return. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Bond and Total Return.
Diversification Opportunities for Global Bond and Total Return
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Global and Total is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Global Bond Fund and Total Return Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Return 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 Total Return. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Return has no effect on the direction of Global Bond i.e., Global Bond and Total Return go up and down completely randomly.
Pair Corralation between Global Bond and Total Return
Assuming the 90 days horizon Global Bond Fund is expected to generate 0.46 times more return on investment than Total Return. However, Global Bond Fund is 2.15 times less risky than Total Return. It trades about 0.07 of its potential returns per unit of risk. Total Return Fund is currently generating about -0.03 per unit of risk. If you would invest 952.00 in Global Bond Fund on August 27, 2024 and sell it today you would earn a total of 2.00 from holding Global Bond Fund or generate 0.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Bond Fund vs. Total Return Fund
Performance |
| Timeline |
| Global Bond Fund |
| Total Return |
Global Bond and Total Return Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Bond and Total Return
The main advantage of trading using opposite Global Bond and Total Return positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Bond position performs unexpectedly, Total Return 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 Total Return will offset losses from the drop in Total Return's long position.| Global Bond vs. Pimco Rae Worldwide | Global Bond vs. Pimco Rae Worldwide | Global Bond vs. Pimco Rae Worldwide | Global Bond vs. Pimco Rae Worldwide |
| Total Return vs. Pimco Rae Worldwide | Total Return vs. Pimco Rae Worldwide | Total Return vs. Pimco Rae Worldwide | Total Return vs. Pimco Rae Worldwide |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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