Correlation Between Global Bond and Equity Index
Can any of the company-specific risk be diversified away by investing in both Global Bond and Equity Index 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 Bond and Equity Index into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Bond Fund and Equity Index Institutional, you can compare the effects of market volatilities on Global Bond and Equity Index 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 Bond with a short position of Equity Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Bond and Equity Index.
Diversification Opportunities for Global Bond and Equity Index
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Global and Equity is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Global Bond Fund and Equity Index Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Index Institu and Global 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 Global Bond Fund are associated (or correlated) with Equity Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Index Institu has no effect on the direction of Global Bond i.e., Global Bond and Equity Index go up and down completely randomly.
Pair Corralation between Global Bond and Equity Index
Assuming the 90 days horizon Global Bond is expected to generate 2.86 times less return on investment than Equity Index. But when comparing it to its historical volatility, Global Bond Fund is 2.19 times less risky than Equity Index. It trades about 0.14 of its potential returns per unit of risk. Equity Index Institutional is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 6,287 in Equity Index Institutional on June 8, 2025 and sell it today you would earn a total of 143.00 from holding Equity Index Institutional or generate 2.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Bond Fund vs. Equity Index Institutional
Performance |
| Timeline |
| Global Bond Fund |
| Equity Index Institu |
Global Bond and Equity Index Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Bond and Equity Index
The main advantage of trading using opposite Global Bond and Equity Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Bond position performs unexpectedly, Equity Index 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 Equity Index will offset losses from the drop in Equity Index's long position.| Global Bond vs. Growth Allocation Fund | Global Bond vs. Defensive Market Strategies | Global Bond vs. Defensive Market Strategies | Global Bond vs. Value Equity Institutional |
| Equity Index vs. Guidestone Fds Growth | Equity Index vs. Small Cap Equity | Equity Index vs. Value Equity Institutional | Equity Index vs. Medium Duration Bond Institutional |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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