Correlation Between Diversified Bond and Commodities Strategy
Can any of the company-specific risk be diversified away by investing in both Diversified Bond and Commodities Strategy 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 Diversified Bond and Commodities Strategy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diversified Bond Fund and Commodities Strategy Fund, you can compare the effects of market volatilities on Diversified Bond and Commodities Strategy 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 Diversified Bond with a short position of Commodities Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diversified Bond and Commodities Strategy.
Diversification Opportunities for Diversified Bond and Commodities Strategy
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between DIVERSIFIED and Commodities is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Diversified Bond Fund and Commodities Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commodities Strategy and Diversified 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 Diversified Bond Fund are associated (or correlated) with Commodities Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commodities Strategy has no effect on the direction of Diversified Bond i.e., Diversified Bond and Commodities Strategy go up and down completely randomly.
Pair Corralation between Diversified Bond and Commodities Strategy
Assuming the 90 days horizon Diversified Bond is expected to generate 1.41 times less return on investment than Commodities Strategy. But when comparing it to its historical volatility, Diversified Bond Fund is 2.99 times less risky than Commodities Strategy. It trades about 0.07 of its potential returns per unit of risk. Commodities Strategy Fund is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 13,710 in Commodities Strategy Fund on August 31, 2025 and sell it today you would earn a total of 1,960 from holding Commodities Strategy Fund or generate 14.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diversified Bond Fund vs. Commodities Strategy Fund
Performance |
| Timeline |
| Diversified Bond |
| Commodities Strategy |
Diversified Bond and Commodities Strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diversified Bond and Commodities Strategy
The main advantage of trading using opposite Diversified Bond and Commodities Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diversified Bond position performs unexpectedly, Commodities Strategy 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 Commodities Strategy will offset losses from the drop in Commodities Strategy's long position.| Diversified Bond vs. Mid Cap Value | Diversified Bond vs. Equity Growth Fund | Diversified Bond vs. Income Growth Fund | Diversified Bond vs. Diversified Bond Fund |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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