Correlation Between Low Duration and Real Return
Can any of the company-specific risk be diversified away by investing in both Low Duration and Real 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 Low Duration and Real Return into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Low Duration Fund and Real Return Fund, you can compare the effects of market volatilities on Low Duration and Real 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 Low Duration with a short position of Real Return. Check out your portfolio center. Please also check ongoing floating volatility patterns of Low Duration and Real Return.
Diversification Opportunities for Low Duration and Real Return
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Low and Real is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Low Duration Fund and Real Return Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Return Fund and Low Duration 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 Low Duration Fund are associated (or correlated) with Real Return. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Return Fund has no effect on the direction of Low Duration i.e., Low Duration and Real Return go up and down completely randomly.
Pair Corralation between Low Duration and Real Return
Assuming the 90 days horizon Low Duration is expected to generate 1.15 times less return on investment than Real Return. But when comparing it to its historical volatility, Low Duration Fund is 2.23 times less risky than Real Return. It trades about 0.14 of its potential returns per unit of risk. Real Return Fund is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 951.00 in Real Return Fund on August 26, 2024 and sell it today you would earn a total of 54.00 from holding Real Return Fund or generate 5.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Low Duration Fund vs. Real Return Fund
Performance |
| Timeline |
| Low Duration |
| Real Return Fund |
Low Duration and Real Return Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Low Duration and Real Return
The main advantage of trading using opposite Low Duration and Real Return positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Low Duration position performs unexpectedly, Real 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 Real Return will offset losses from the drop in Real Return's long position.| Low Duration vs. Real Return Fund | Low Duration vs. Pimco Foreign Bond | Low Duration vs. Commodityrealreturn Strategy Fund | Low Duration vs. High Yield Fund |
| Real Return vs. Pimco Rae Worldwide | Real Return vs. Pimco Rae Worldwide | Real Return vs. Pimco Rae Worldwide | Real 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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