Correlation Between Bond Fund and Limited Duration
Can any of the company-specific risk be diversified away by investing in both Bond Fund and Limited Duration 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 Bond Fund and Limited Duration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bond Fund Class and Limited Duration Fund, you can compare the effects of market volatilities on Bond Fund and Limited Duration 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 Bond Fund with a short position of Limited Duration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bond Fund and Limited Duration.
Diversification Opportunities for Bond Fund and Limited Duration
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bond and Limited is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Bond Fund Class and Limited Duration Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Limited Duration and Bond Fund 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 Bond Fund Class are associated (or correlated) with Limited Duration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Limited Duration has no effect on the direction of Bond Fund i.e., Bond Fund and Limited Duration go up and down completely randomly.
Pair Corralation between Bond Fund and Limited Duration
Assuming the 90 days horizon Bond Fund Class is expected to generate 1.81 times more return on investment than Limited Duration. However, Bond Fund is 1.81 times more volatile than Limited Duration Fund. It trades about 0.16 of its potential returns per unit of risk. Limited Duration Fund is currently generating about 0.14 per unit of risk. If you would invest 836.00 in Bond Fund Class on June 11, 2025 and sell it today you would earn a total of 24.00 from holding Bond Fund Class or generate 2.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bond Fund Class vs. Limited Duration Fund
Performance |
| Timeline |
| Bond Fund Class |
| Limited Duration |
Bond Fund and Limited Duration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bond Fund and Limited Duration
The main advantage of trading using opposite Bond Fund and Limited Duration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bond Fund position performs unexpectedly, Limited Duration 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 Limited Duration will offset losses from the drop in Limited Duration's long position.| Bond Fund vs. T Rowe Price | Bond Fund vs. Qs Defensive Growth | Bond Fund vs. T Rowe Price | Bond Fund vs. Morningstar Growth Etf |
| Limited Duration vs. Bond Fund Investor | Limited Duration vs. Strategic Enhanced Yield | Limited Duration vs. Cavanal Hill Hedged | Limited Duration vs. Cavanal Hill Ultra |
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.
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