Correlation Between Core Fixed and Real Assets

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

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

Diversification Opportunities for Core Fixed and Real Assets

0.78

Correlation Coefficient

Core Fixed  Real Assets

Poor diversification

The 3 months correlation between Core and Real is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Core Fixed Income and Real Assets Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Assets Portfolio and Core Fixed 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 Core Fixed Income are associated (or correlated) with Real Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Assets Portfolio has no effect on the direction of Core Fixed i.e., Core Fixed and Real Assets go up and down completely randomly.

Pair Corralation between Core Fixed and Real Assets

Assuming the 90 days horizon Core Fixed is expected to generate 1.18 times less return on investment than Real Assets. But when comparing it to its historical volatility, Core Fixed Income is 1.21 times less risky than Real Assets. It trades about 0.13 of its potential returns per unit of risk. Real Assets Portfolio is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,060  in Real Assets Portfolio on May 8, 2025 and sell it today you would earn a total of  30.00  from holding Real Assets Portfolio or generate 2.83% return on investment over 90 days.

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

Core Fixed Income  vs.  Real Assets Portfolio

Core Fixed Income

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Core Fixed Income are ranked lower than 10 (%) 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.

Real Assets Portfolio

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Real Assets Portfolio are ranked lower than 10 (%) 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.

Pair Trading with Core Fixed and Real Assets

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

The idea behind Core Fixed Income and Real Assets 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.