Correlation Between Commodity Return and Versatile Bond

Can any of the company-specific risk be diversified away by investing in both Commodity Return and Versatile 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 Commodity Return and Versatile Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Commodity Return Strategy and Versatile Bond Portfolio, you can compare the effects of market volatilities on Commodity Return and Versatile 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 Commodity Return with a short position of Versatile Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commodity Return and Versatile Bond.

Diversification Opportunities for Commodity Return and Versatile Bond

-0.25

Correlation Coefficient

Commodity Return  Versatile Bond

Very good diversification

The 3 months correlation between Commodity and Versatile is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Commodity Return Strategy and Versatile Bond Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Versatile Bond Portfolio and Commodity 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 Commodity Return Strategy are associated (or correlated) with Versatile Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Versatile Bond Portfolio has no effect on the direction of Commodity Return i.e., Commodity Return and Versatile Bond go up and down completely randomly.

Pair Corralation between Commodity Return and Versatile Bond

Assuming the 90 days horizon Commodity Return is expected to generate 3.79 times less return on investment than Versatile Bond. In addition to that, Commodity Return is 7.79 times more volatile than Versatile Bond Portfolio. It trades about 0.02 of its total potential returns per unit of risk. Versatile Bond Portfolio is currently generating about 0.49 per unit of volatility. If you would invest  6,480  in Versatile Bond Portfolio on May 26, 2025 and sell it today you would earn a total of  191.00  from holding Versatile Bond Portfolio or generate 2.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Commodity Return Strategy  vs.  Versatile Bond Portfolio

Commodity Return Strategy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Commodity Return Strategy are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Commodity Return is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Versatile Bond Portfolio

Risk-Adjusted Performance

High

Compared to the overall equity markets, risk-adjusted returns on investments in Versatile Bond Portfolio are ranked lower than 38 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Versatile Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Commodity Return and Versatile Bond

The main advantage of trading using opposite Commodity Return and Versatile Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commodity Return position performs unexpectedly, Versatile 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 Versatile Bond will offset losses from the drop in Versatile Bond's long position.

The idea behind Commodity Return Strategy and Versatile Bond Portfolio pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.