Correlation Between Real Assets and Core Fixed

Can any of the company-specific risk be diversified away by investing in both Real Assets and Core Fixed 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 Real Assets and Core Fixed into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Real Assets Portfolio and Core Fixed Income, you can compare the effects of market volatilities on Real Assets and Core Fixed 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 Real Assets with a short position of Core Fixed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Real Assets and Core Fixed.

Diversification Opportunities for Real Assets and Core Fixed

0.85

Correlation Coefficient

Real Assets  Core Fixed

Very poor diversification

The 3 months correlation between Real and Core is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Real Assets Portfolio and Core Fixed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Fixed Income and Real Assets 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 Real Assets Portfolio are associated (or correlated) with Core Fixed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Fixed Income has no effect on the direction of Real Assets i.e., Real Assets and Core Fixed go up and down completely randomly.

Pair Corralation between Real Assets and Core Fixed

Assuming the 90 days horizon Real Assets Portfolio is expected to generate 1.11 times more return on investment than Core Fixed. However, Real Assets is 1.11 times more volatile than Core Fixed Income. It trades about 0.1 of its potential returns per unit of risk. Core Fixed Income is currently generating about 0.0 per unit of risk. If you would invest  1,084  in Real Assets Portfolio on April 23, 2025 and sell it today you would earn a total of  6.00  from holding Real Assets Portfolio or generate 0.55% return on investment over 90 days.

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

Real Assets Portfolio  vs.  Core Fixed Income

Real Assets Portfolio

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Real Assets Portfolio are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Real Assets is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Core Fixed Income

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Core Fixed Income are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Core Fixed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Real Assets and Core Fixed

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

The idea behind Real Assets Portfolio and Core Fixed Income 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.