Correlation Between Corporate Bond and Global Fixed

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

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

Diversification Opportunities for Corporate Bond and Global Fixed

0.6

Correlation Coefficient

Corporate Bond  Global Fixed

Poor diversification

The 3 months correlation between Corporate and Global is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Corporate Bond Portfolio and Global Fixed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Fixed Income and Corporate 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 Corporate Bond Portfolio are associated (or correlated) with Global Fixed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Fixed Income has no effect on the direction of Corporate Bond i.e., Corporate Bond and Global Fixed go up and down completely randomly.

Pair Corralation between Corporate Bond and Global Fixed

Assuming the 90 days horizon Corporate Bond is expected to generate 1.14 times less return on investment than Global Fixed. In addition to that, Corporate Bond is 2.04 times more volatile than Global Fixed Income. It trades about 0.06 of its total potential returns per unit of risk. Global Fixed Income is currently generating about 0.14 per unit of volatility. If you would invest  455.00  in Global Fixed Income on September 19, 2024 and sell it today you would earn a total of  69.00  from holding Global Fixed Income or generate 15.16% return on investment over 90 days.

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

Corporate Bond Portfolio  vs.  Global Fixed Income

Corporate Bond Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Corporate Bond Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Corporate Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Global Fixed Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Fixed Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Global 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 Corporate Bond and Global Fixed

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

The idea behind Corporate Bond Portfolio and Global 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..