Correlation Between Global Real and Short Duration
Can any of the company-specific risk be diversified away by investing in both Global Real and Short Duration 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 Short Duration 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 Short Duration Bond, you can compare the effects of market volatilities on Global Real and Short Duration 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 Short Duration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Real and Short Duration.
Diversification Opportunities for Global Real and Short Duration
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Global and Short is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Global Real Estate and Short Duration Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Duration 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 Short Duration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Duration Bond has no effect on the direction of Global Real i.e., Global Real and Short Duration go up and down completely randomly.
Pair Corralation between Global Real and Short Duration
Assuming the 90 days horizon Global Real Estate is expected to under-perform the Short Duration. In addition to that, Global Real is 9.38 times more volatile than Short Duration Bond. It trades about -0.13 of its total potential returns per unit of risk. Short Duration Bond is currently generating about -0.06 per unit of volatility. If you would invest 1,877 in Short Duration Bond on August 25, 2024 and sell it today you would lose (2.00) from holding Short Duration Bond or give up 0.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Real Estate vs. Short Duration Bond
Performance |
| Timeline |
| Global Real Estate |
| Short Duration Bond |
Global Real and Short Duration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Real and Short Duration
The main advantage of trading using opposite Global Real and Short Duration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Real position performs unexpectedly, Short Duration 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 Short Duration will offset losses from the drop in Short Duration's long position.| Global Real vs. Gmo Resources | Global Real vs. Franklin Natural Resources | Global Real vs. Jennison Natural Resources | Global Real vs. Alpsalerian Energy Infrastructure |
| Short Duration vs. Maryland Short Term Tax Free | Short Duration vs. Nuveen Short Term | Short Duration vs. Ultra Short Term Fixed | Short Duration vs. Guggenheim Long Short |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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