Correlation Between Global Real and Strategic Bond
Can any of the company-specific risk be diversified away by investing in both Global Real and Strategic 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 Global Real and Strategic Bond 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 Strategic Bond Fund, you can compare the effects of market volatilities on Global Real and Strategic 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 Global Real with a short position of Strategic Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Real and Strategic Bond.
Diversification Opportunities for Global Real and Strategic Bond
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Global and Strategic is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Global Real Estate and Strategic Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic 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 Strategic Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Bond has no effect on the direction of Global Real i.e., Global Real and Strategic Bond go up and down completely randomly.
Pair Corralation between Global Real and Strategic Bond
Assuming the 90 days horizon Global Real Estate is expected to generate 2.27 times more return on investment than Strategic Bond. However, Global Real is 2.27 times more volatile than Strategic Bond Fund. It trades about 0.14 of its potential returns per unit of risk. Strategic Bond Fund is currently generating about 0.13 per unit of risk. If you would invest 3,079 in Global Real Estate on September 1, 2024 and sell it today you would earn a total of 74.00 from holding Global Real Estate or generate 2.4% 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. Strategic Bond Fund
Performance |
| Timeline |
| Global Real Estate |
| Strategic Bond |
Global Real and Strategic Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Real and Strategic Bond
The main advantage of trading using opposite Global Real and Strategic Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Real position performs unexpectedly, Strategic 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 Strategic Bond will offset losses from the drop in Strategic Bond's long position.| Global Real vs. International Developed Markets | Global Real vs. Global Real Estate | Global Real vs. Global Real Estate | Global Real vs. Global Real Estate |
| Strategic Bond vs. International Developed Markets | Strategic Bond vs. Global Real Estate | Strategic Bond vs. Global Real Estate | Strategic Bond 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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