Correlation Between Core Bond and Pro-blend(r) Moderate

Can any of the company-specific risk be diversified away by investing in both Core Bond and Pro-blend(r) Moderate 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 Core Bond and Pro-blend(r) Moderate into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Core Bond Series and Pro Blend Moderate Term, you can compare the effects of market volatilities on Core Bond and Pro-blend(r) Moderate 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 Core Bond with a short position of Pro-blend(r) Moderate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Core Bond and Pro-blend(r) Moderate.

Diversification Opportunities for Core Bond and Pro-blend(r) Moderate

0.66

Correlation Coefficient

Core Bond  Pro-blend(r) Moderate

Poor diversification

The 3 months correlation between Core and Pro-blend(r) is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Core Bond Series and Pro Blend Moderate Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pro-blend(r) Moderate and Core 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 Core Bond Series are associated (or correlated) with Pro-blend(r) Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pro-blend(r) Moderate has no effect on the direction of Core Bond i.e., Core Bond and Pro-blend(r) Moderate go up and down completely randomly.

Pair Corralation between Core Bond and Pro-blend(r) Moderate

Assuming the 90 days horizon Core Bond is expected to generate 5.32 times less return on investment than Pro-blend(r) Moderate. But when comparing it to its historical volatility, Core Bond Series is 1.22 times less risky than Pro-blend(r) Moderate. It trades about 0.05 of its potential returns per unit of risk. Pro Blend Moderate Term is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,415  in Pro Blend Moderate Term on April 25, 2025 and sell it today you would earn a total of  69.00  from holding Pro Blend Moderate Term or generate 4.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Core Bond Series  vs.  Pro Blend Moderate Term

Core Bond Series

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Core Bond Series are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Core Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pro-blend(r) Moderate

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pro Blend Moderate Term are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pro-blend(r) Moderate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Core Bond and Pro-blend(r) Moderate

The main advantage of trading using opposite Core Bond and Pro-blend(r) Moderate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Core Bond position performs unexpectedly, Pro-blend(r) Moderate 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 Pro-blend(r) Moderate will offset losses from the drop in Pro-blend(r) Moderate's long position.

The idea behind Core Bond Series and Pro Blend Moderate Term pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.