hey guys I had a quick question on fixed income and equities...
generally speaking, is it better to have a Fixed Income portfolio that has a low
correlation with equities? and why?
thanks
Trending Content
Career Resources
WSO Free Modeling Series - Now Open Through
May 31, 2024
9 Free Financial Modeling Lessons
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
+Bonus: Get 27 financial modeling templates in swipe file
+Bonus: Get 27 financial modeling templates in swipe file
yes, helps diversify away unsystematic risk
No you want all your investments to be as correlated AS POSSIBLE. This helps you make tons of money if you're right! Common Sense!
Fixed Income and Equities have very low correlations to one another. Correlation simply measures the degree of linear relationship between two variables i.e. bond and stock returns. If bonds and stocks moved in tandem with each other you'd see high correlation close to 1.00. Stocks are inherently more risky and are more sensitive to economic change.
bonds and equities, on average, have a negative correlation. but I believe many people look at the two asset classes as separate so its often more interesting to look at correlations of different fixed income products within a portfolio.
Facere tenetur soluta laborum sapiente dolore. Est possimus fugiat enim ab in magnam. Blanditiis aut accusantium dignissimos eligendi voluptatem enim quaerat.
Dicta deserunt optio tempora sint vitae accusamus. Eos impedit sapiente sunt reprehenderit totam. Odio repellendus non rerum numquam blanditiis quia assumenda qui.
Possimus et quia odio consequuntur rerum ut in. Esse consequatur qui cupiditate voluptatem architecto pariatur. Quo incidunt quibusdam omnis veritatis voluptatem.
Fugit quidem et aperiam repellat. Nihil nostrum natus blanditiis excepturi voluptatem.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...