Correlation Between Bondbloxx ETF and Morningstar Defensive

Can any of the company-specific risk be diversified away by investing in both Bondbloxx ETF and Morningstar Defensive 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 Bondbloxx ETF and Morningstar Defensive into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bondbloxx ETF Trust and Morningstar Defensive Bond, you can compare the effects of market volatilities on Bondbloxx ETF and Morningstar Defensive 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 Bondbloxx ETF with a short position of Morningstar Defensive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bondbloxx ETF and Morningstar Defensive.

Diversification Opportunities for Bondbloxx ETF and Morningstar Defensive

0.95

Correlation Coefficient

Bondbloxx ETF  Morningstar Defensive

Almost no diversification

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

Pair Corralation between Bondbloxx ETF and Morningstar Defensive

Given the investment horizon of 90 days Bondbloxx ETF is expected to generate 1.26 times less return on investment than Morningstar Defensive. But when comparing it to its historical volatility, Bondbloxx ETF Trust is 1.15 times less risky than Morningstar Defensive. It trades about 0.16 of its potential returns per unit of risk. Morningstar Defensive Bond is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  888.00  in Morningstar Defensive Bond on December 2, 2024 and sell it today you would earn a total of  90.00  from holding Morningstar Defensive Bond or generate 10.14% return on investment over 90 days.

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

Bondbloxx ETF Trust  vs.  Morningstar Defensive Bond

Bondbloxx ETF Trust

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bondbloxx ETF Trust are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Bondbloxx ETF is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Morningstar Defensive

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morningstar Defensive Bond are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Morningstar Defensive is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bondbloxx ETF and Morningstar Defensive

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

The idea behind Bondbloxx ETF Trust and Morningstar Defensive 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.