Correlation Between International Developed and Investment Grade
Can any of the company-specific risk be diversified away by investing in both International Developed and Investment Grade 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 International Developed and Investment Grade into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Developed Markets and Investment Grade Bond, you can compare the effects of market volatilities on International Developed and Investment Grade 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 International Developed with a short position of Investment Grade. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Developed and Investment Grade.
Diversification Opportunities for International Developed and Investment Grade
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between International and Investment is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding International Developed Market and Investment Grade Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Grade Bond and International Developed 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 International Developed Markets are associated (or correlated) with Investment Grade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Grade Bond has no effect on the direction of International Developed i.e., International Developed and Investment Grade go up and down completely randomly.
Pair Corralation between International Developed and Investment Grade
Assuming the 90 days horizon International Developed Markets is expected to generate 2.47 times more return on investment than Investment Grade. However, International Developed is 2.47 times more volatile than Investment Grade Bond. It trades about 0.06 of its potential returns per unit of risk. Investment Grade Bond is currently generating about 0.05 per unit of risk. If you would invest 3,792 in International Developed Markets on January 25, 2025 and sell it today you would earn a total of 684.00 from holding International Developed Markets or generate 18.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Developed Market vs. Investment Grade Bond
Performance |
| Timeline |
| International Developed |
| Investment Grade Bond |
International Developed and Investment Grade Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Developed and Investment Grade
The main advantage of trading using opposite International Developed and Investment Grade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Developed position performs unexpectedly, Investment Grade 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 Investment Grade will offset losses from the drop in Investment Grade's long position.| International Developed vs. Rbb Fund | International Developed vs. Rbc Funds Trust | International Developed vs. Ab Global Risk | International Developed vs. Western Asset New |
| Investment Grade vs. International Developed Markets | Investment Grade vs. Global Real Estate | Investment Grade vs. Global Real Estate | Investment Grade vs. Global Real Estate |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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