Correlation Between Global Diversified and Core Plus

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

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

Diversification Opportunities for Global Diversified and Core Plus

0.95

Correlation Coefficient

Global Diversified  Core Plus

Almost no diversification

The 3 months correlation between GLOBAL and Core is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Global Diversified Income and Core Plus Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Plus Bond and Global Diversified 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 Global Diversified Income are associated (or correlated) with Core Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Plus Bond has no effect on the direction of Global Diversified i.e., Global Diversified and Core Plus go up and down completely randomly.

Pair Corralation between Global Diversified and Core Plus

Assuming the 90 days horizon Global Diversified is expected to generate 1.44 times less return on investment than Core Plus. But when comparing it to its historical volatility, Global Diversified Income is 1.66 times less risky than Core Plus. It trades about 0.17 of its potential returns per unit of risk. Core Plus Bond is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  887.00  in Core Plus Bond on December 20, 2024 and sell it today you would earn a total of  23.00  from holding Core Plus Bond or generate 2.59% return on investment over 90 days.

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

Global Diversified Income  vs.  Core Plus Bond

Global Diversified Income

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Diversified Income are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Global Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Core Plus Bond

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Core Plus Bond are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Core Plus is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global Diversified and Core Plus

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

The idea behind Global Diversified Income and Core Plus Bond 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.