Correlation Between Defensive Market and Low-duration Bond
Can any of the company-specific risk be diversified away by investing in both Defensive Market and Low-duration 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 Defensive Market and Low-duration Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Defensive Market Strategies and Low Duration Bond Investor, you can compare the effects of market volatilities on Defensive Market and Low-duration 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 Defensive Market with a short position of Low-duration Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Defensive Market and Low-duration Bond.
Diversification Opportunities for Defensive Market and Low-duration Bond
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Defensive and Low-duration is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Defensive Market Strategies and Low Duration Bond Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Low Duration Bond and Defensive Market 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 Defensive Market Strategies are associated (or correlated) with Low-duration Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Low Duration Bond has no effect on the direction of Defensive Market i.e., Defensive Market and Low-duration Bond go up and down completely randomly.
Pair Corralation between Defensive Market and Low-duration Bond
Assuming the 90 days horizon Defensive Market Strategies is expected to under-perform the Low-duration Bond. In addition to that, Defensive Market is 6.15 times more volatile than Low Duration Bond Investor. It trades about -0.03 of its total potential returns per unit of risk. Low Duration Bond Investor is currently generating about 0.17 per unit of volatility. If you would invest 1,277 in Low Duration Bond Investor on December 28, 2024 and sell it today you would earn a total of 12.00 from holding Low Duration Bond Investor or generate 0.94% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 98.36% |
Values | Daily Returns |
Defensive Market Strategies vs. Low Duration Bond Investor
Performance |
Timeline |
Defensive Market Str |
Low Duration Bond |
Defensive Market and Low-duration Bond Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Defensive Market and Low-duration Bond
The main advantage of trading using opposite Defensive Market and Low-duration Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Defensive Market position performs unexpectedly, Low-duration 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 Low-duration Bond will offset losses from the drop in Low-duration Bond's long position.Defensive Market vs. Multimanager Lifestyle Moderate | Defensive Market vs. John Hancock Funds | Defensive Market vs. T Rowe Price | Defensive Market vs. Tiaa Cref Lifecycle Retirement |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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