Correlation Between Foreign Bond and Pace International
Can any of the company-specific risk be diversified away by investing in both Foreign Bond and Pace International 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 Foreign Bond and Pace International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Foreign Bond Fund and Pace International Fixed, you can compare the effects of market volatilities on Foreign Bond and Pace International 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 Foreign Bond with a short position of Pace International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foreign Bond and Pace International.
Diversification Opportunities for Foreign Bond and Pace International
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Foreign and Pace is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Foreign Bond Fund and Pace International Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace International Fixed and Foreign 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 Foreign Bond Fund are associated (or correlated) with Pace International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace International Fixed has no effect on the direction of Foreign Bond i.e., Foreign Bond and Pace International go up and down completely randomly.
Pair Corralation between Foreign Bond and Pace International
Assuming the 90 days horizon Foreign Bond Fund is expected to generate 0.91 times more return on investment than Pace International. However, Foreign Bond Fund is 1.1 times less risky than Pace International. It trades about -0.24 of its potential returns per unit of risk. Pace International Fixed is currently generating about -0.25 per unit of risk. If you would invest 752.00 in Foreign Bond Fund on January 19, 2024 and sell it today you would lose (13.00) from holding Foreign Bond Fund or give up 1.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Foreign Bond Fund vs. Pace International Fixed
Performance |
| Timeline |
| Foreign Bond |
| Pace International Fixed |
Foreign Bond and Pace International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Foreign Bond and Pace International
The main advantage of trading using opposite Foreign Bond and Pace International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Foreign Bond position performs unexpectedly, Pace International 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 Pace International will offset losses from the drop in Pace International's long position.| Foreign Bond vs. Templeton Global Bond | Foreign Bond vs. Capital World Bond | Foreign Bond vs. Capital World Bond | Foreign Bond vs. Capital World Bond |
| Pace International vs. Templeton Global Bond | Pace International vs. Capital World Bond | Pace International vs. Capital World Bond | Pace International vs. Capital World Bond |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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