Correlation Between Active International and Global Fixed

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

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

Diversification Opportunities for Active International and Global Fixed

0.23

Correlation Coefficient

Active International  Global Fixed

Modest diversification

The 3 months correlation between Active and Global is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Active International Allocatio 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 Active International 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 Active International Allocation 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 Active International i.e., Active International and Global Fixed go up and down completely randomly.

Pair Corralation between Active International and Global Fixed

Assuming the 90 days horizon Active International Allocation is expected to under-perform the Global Fixed. In addition to that, Active International is 7.62 times more volatile than Global Fixed Income. It trades about -0.22 of its total potential returns per unit of risk. Global Fixed Income is currently generating about -0.33 per unit of volatility. If you would invest  518.00  in Global Fixed Income on September 25, 2024 and sell it today you would lose (4.00) from holding Global Fixed Income or give up 0.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Active International Allocatio  vs.  Global Fixed Income

Active International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Active International Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains 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 Active International and Global Fixed

The main advantage of trading using opposite Active International and Global Fixed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Active International 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 Active International Allocation 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.