Correlation Between Foreign Bond and All Asset
Can any of the company-specific risk be diversified away by investing in both Foreign Bond and All Asset 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 Foreign Bond and All Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Foreign Bond Fund and All Asset Fund, you can compare the effects of market volatilities on Foreign Bond and All Asset 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 Foreign Bond with a short position of All Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foreign Bond and All Asset.
Diversification Opportunities for Foreign Bond and All Asset
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Foreign and All is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Foreign Bond Fund and All Asset Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on All Asset Fund and Foreign Bond 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 Foreign Bond Fund are associated (or correlated) with All Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of All Asset Fund has no effect on the direction of Foreign Bond i.e., Foreign Bond and All Asset go up and down completely randomly.
Pair Corralation between Foreign Bond and All Asset
Assuming the 90 days horizon Foreign Bond is expected to generate 1.49 times less return on investment than All Asset. In addition to that, Foreign Bond is 1.47 times more volatile than All Asset Fund. It trades about 0.09 of its total potential returns per unit of risk. All Asset Fund is currently generating about 0.2 per unit of volatility. If you would invest 1,093 in All Asset Fund on April 25, 2025 and sell it today you would earn a total of 43.00 from holding All Asset Fund or generate 3.93% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Foreign Bond Fund vs. All Asset Fund
Performance |
Timeline |
Foreign Bond |
All Asset Fund |
Foreign Bond and All Asset Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Foreign Bond and All Asset
The main advantage of trading using opposite Foreign Bond and All Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Foreign Bond position performs unexpectedly, All Asset 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 All Asset will offset losses from the drop in All Asset's long position.Foreign Bond vs. Transamerica Financial Life | Foreign Bond vs. Mesirow Financial Small | Foreign Bond vs. John Hancock Financial | Foreign Bond vs. Vanguard Financials Index |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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