Correlation Between Medium-duration Bond and Aggressive Allocation
Can any of the company-specific risk be diversified away by investing in both Medium-duration Bond and Aggressive Allocation 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 Medium-duration Bond and Aggressive Allocation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Medium Duration Bond Institutional and Aggressive Allocation Fund, you can compare the effects of market volatilities on Medium-duration Bond and Aggressive Allocation 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 Medium-duration Bond with a short position of Aggressive Allocation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medium-duration Bond and Aggressive Allocation.
Diversification Opportunities for Medium-duration Bond and Aggressive Allocation
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Medium-duration and Aggressive is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Medium Duration Bond Instituti and Aggressive Allocation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Allocation and Medium-duration 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 Medium Duration Bond Institutional are associated (or correlated) with Aggressive Allocation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Allocation has no effect on the direction of Medium-duration Bond i.e., Medium-duration Bond and Aggressive Allocation go up and down completely randomly.
Pair Corralation between Medium-duration Bond and Aggressive Allocation
Assuming the 90 days horizon Medium-duration Bond is expected to generate 2.73 times less return on investment than Aggressive Allocation. But when comparing it to its historical volatility, Medium Duration Bond Institutional is 2.49 times less risky than Aggressive Allocation. It trades about 0.07 of its potential returns per unit of risk. Aggressive Allocation Fund is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,047 in Aggressive Allocation Fund on June 5, 2025 and sell it today you would earn a total of 400.00 from holding Aggressive Allocation Fund or generate 38.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Medium Duration Bond Instituti vs. Aggressive Allocation Fund
Performance |
| Timeline |
| Medium Duration Bond |
| Aggressive Allocation |
Medium-duration Bond and Aggressive Allocation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Medium-duration Bond and Aggressive Allocation
The main advantage of trading using opposite Medium-duration Bond and Aggressive Allocation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medium-duration Bond position performs unexpectedly, Aggressive Allocation 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 Aggressive Allocation will offset losses from the drop in Aggressive Allocation's long position.| Medium-duration Bond vs. Vanguard Health Care | Medium-duration Bond vs. Putnam Global Health | Medium-duration Bond vs. Lord Abbett Health | Medium-duration Bond vs. Blackrock Health Sciences |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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