Correlation Between Global Real and Investment Grade
Can any of the company-specific risk be diversified away by investing in both Global Real 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 Global Real and Investment Grade into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Real Estate and Investment Grade Bond, you can compare the effects of market volatilities on Global Real 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 Global Real with a short position of Investment Grade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Real and Investment Grade.
Diversification Opportunities for Global Real and Investment Grade
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Global and Investment is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Global Real Estate 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 Global Real 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 Real Estate 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 Global Real i.e., Global Real and Investment Grade go up and down completely randomly.
Pair Corralation between Global Real and Investment Grade
Assuming the 90 days horizon Global Real Estate is expected to generate 2.39 times more return on investment than Investment Grade. However, Global Real is 2.39 times more volatile than Investment Grade Bond. It trades about 0.05 of its potential returns per unit of risk. Investment Grade Bond is currently generating about 0.08 per unit of risk. If you would invest 3,018 in Global Real Estate on August 31, 2024 and sell it today you would earn a total of 28.00 from holding Global Real Estate or generate 0.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Real Estate vs. Investment Grade Bond
Performance |
| Timeline |
| Global Real Estate |
| Investment Grade Bond |
Global Real and Investment Grade Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Real and Investment Grade
The main advantage of trading using opposite Global Real and Investment Grade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Real 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.| Global Real vs. Barings Global Floating | Global Real vs. Dodge Global Stock | Global Real vs. Rbc Global Opportunities | Global Real vs. Scharf Global Opportunity |
| Investment Grade vs. Oklahoma Municipal Fund | Investment Grade vs. Ab Impact Municipal | Investment Grade vs. Alliancebernstein National Municipal | Investment Grade vs. California High Yield Municipal |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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