Correlation Between Total Return and Flexible Bond
Can any of the company-specific risk be diversified away by investing in both Total Return and Flexible 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 Total Return and Flexible Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Total Return Fund and Flexible Bond Portfolio, you can compare the effects of market volatilities on Total Return and Flexible 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 Total Return with a short position of Flexible Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Total Return and Flexible Bond.
Diversification Opportunities for Total Return and Flexible Bond
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Total and Flexible is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Total Return Fund and Flexible Bond Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flexible Bond Portfolio and Total Return 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 Total Return Fund are associated (or correlated) with Flexible Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flexible Bond Portfolio has no effect on the direction of Total Return i.e., Total Return and Flexible Bond go up and down completely randomly.
Pair Corralation between Total Return and Flexible Bond
Assuming the 90 days horizon Total Return Fund is expected to generate 0.98 times more return on investment than Flexible Bond. However, Total Return Fund is 1.02 times less risky than Flexible Bond. It trades about 0.04 of its potential returns per unit of risk. Flexible Bond Portfolio is currently generating about 0.04 per unit of risk. If you would invest 799.00 in Total Return Fund on September 2, 2024 and sell it today you would earn a total of 67.00 from holding Total Return Fund or generate 8.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Total Return Fund vs. Flexible Bond Portfolio
Performance |
| Timeline |
| Total Return |
| Flexible Bond Portfolio |
Total Return and Flexible Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Total Return and Flexible Bond
The main advantage of trading using opposite Total Return and Flexible Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Total Return position performs unexpectedly, Flexible 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 Flexible Bond will offset losses from the drop in Flexible Bond's long position.| Total Return vs. Pimco Rae Worldwide | Total Return vs. Pimco Rae Worldwide | Total Return vs. Pimco Rae Worldwide | Total Return vs. Pimco Rae Worldwide |
| Flexible Bond vs. Pimco Global Multi Asset | Flexible Bond vs. Rbc Global Opportunities | Flexible Bond vs. Blue Current Global | Flexible Bond vs. Artisan Global Unconstrained |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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