Correlation Between Real Assets and Global Fixed

Can any of the company-specific risk be diversified away by investing in both Real Assets 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 Real Assets and Global 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 Global Fixed Income, you can compare the effects of market volatilities on Real Assets 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 Real Assets with a short position of Global Fixed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Real Assets and Global Fixed.

Diversification Opportunities for Real Assets and Global Fixed

-0.13

Correlation Coefficient

Real Assets  Global Fixed

Good diversification

The 3 months correlation between Real and Global is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Real Assets 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 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 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 Real Assets i.e., Real Assets and Global Fixed go up and down completely randomly.

Pair Corralation between Real Assets and Global Fixed

Assuming the 90 days horizon Real Assets Portfolio is expected to under-perform the Global Fixed. In addition to that, Real Assets is 3.25 times more volatile than Global Fixed Income. It trades about -0.01 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 20, 2024 and sell it today you would earn a total of  68.00  from holding Global Fixed Income or generate 14.95% return on investment over 90 days.

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

Real Assets Portfolio  vs.  Global Fixed Income

Real Assets Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Real Assets Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund 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 Real Assets and Global Fixed

The main advantage of trading using opposite Real Assets and Global Fixed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Real Assets 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 Real Assets 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.