Correlation Between Corporate Bond and Global Advantage

Can any of the company-specific risk be diversified away by investing in both Corporate Bond and Global Advantage 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 Advantage 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 Advantage Portfolio, you can compare the effects of market volatilities on Corporate Bond and Global Advantage 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 Advantage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Corporate Bond and Global Advantage.

Diversification Opportunities for Corporate Bond and Global Advantage

-0.27

Correlation Coefficient

Corporate Bond  Global Advantage

Very good diversification

The 3 months correlation between Corporate and Global is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Corporate Bond Portfolio and Global Advantage Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Advantage Por 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 Advantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Advantage Por has no effect on the direction of Corporate Bond i.e., Corporate Bond and Global Advantage go up and down completely randomly.

Pair Corralation between Corporate Bond and Global Advantage

Assuming the 90 days horizon Corporate Bond Portfolio is expected to generate 0.14 times more return on investment than Global Advantage. However, Corporate Bond Portfolio is 7.04 times less risky than Global Advantage. It trades about 0.12 of its potential returns per unit of risk. Global Advantage Portfolio is currently generating about -0.05 per unit of risk. If you would invest  1,027  in Corporate Bond Portfolio on December 23, 2024 and sell it today you would earn a total of  23.00  from holding Corporate Bond Portfolio or generate 2.24% return on investment over 90 days.

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

Corporate Bond Portfolio  vs.  Global Advantage Portfolio

Corporate Bond Portfolio

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Corporate Bond Portfolio are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic 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 Advantage Por

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global Advantage Portfolio 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.

Pair Trading with Corporate Bond and Global Advantage

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

The idea behind Corporate Bond Portfolio and Global Advantage 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.