RetireJapan

Haystack wrote: ↑Wed Feb 02, 2022 7:33 am
I thought It was evident that I was talking about US stocks, but I added a clarification.

It was evident, but that relationship is only true for American investors. Please look at the links I posted. You can see that for Japanese investors advanced market stocks and advanced market bonds are correlated.

4. Reason for the investment?

For instance, if you are looking for something that is the most uncorrelated to American stocks you should choose 20-year treasuries.

It maters why you want bonds in your portfolio, and what your appetite for risk is.

If you're buying bonds because you think they are uncorrelated then it might be worth knowing that they are more correlated than you think.

fools_gold wrote: ↑Wed Feb 02, 2022 8:34 am

It was evident, but that relationship is only true for American investors. Please look at the links I posted. You can see that for Japanese investors advanced market stocks and advanced market bonds are correlated.

With respect, your assertion is illogical. This factor does not change depending on location of the investor.

Haystack wrote: ↑Wed Feb 02, 2022 9:02 am With respect, your assertion is illogical. This factor does not change depending on location of the investor.

It's perfectly logical. Let's say that in dollar terms, US stocks down by 20% and bonds are up by 10%. Now, imagine that at the same time the yen is up by 20%. To a Japanese investor, both US stocks and bonds would be down in yen terms even though for a US investor they are uncorrelated.

Did you look at the links? The correlations are tabulated right there.

fools_gold wrote: ↑Wed Feb 02, 2022 6:59 am
I'm not sure why people think this, because actually foreign bonds are correlated to stocks. For us, the only things that are uncorrelated are Japanese bonds . J-REITs are also weakly correlated. Here are some links showing the correlations:

https://emaxis.jp/special/sokan.html

https://moneyworld.jp/news/03_00014448_news

Thanks for the links. That is great information. Very eye-opening.

fools_gold wrote: ↑Wed Feb 02, 2022 12:49 pm

Haystack wrote: ↑Wed Feb 02, 2022 9:02 am With respect, your assertion is illogical. This factor does not change depending on location of the investor.

It's perfectly logical. Let's say that in dollar terms, US stocks down by 20% and bonds are up by 10%. Now, imagine that at the same time the yen is up by 20%. To a Japanese investor, both US stocks and bonds would be down in yen terms even though for a US investor they are uncorrelated.

Did you look at the links? The correlations are tabulated right there.

1. Correlation between two assets is measured independently of an investor base assets. You seem to have your own definition that you are operating off of.

2. You sources seem to be using only 10 years, which is not too useful.

Work from 2021 from the Pensions Officee seem to suggest that things are much more complicated, and that it depends on economic conditions. However, this work mostly focuses on domestic funds. https://www.gpif.go.jp/investment/20211 ... per_en.pdf

3. Potato's and Tomatoes, 20 year US government treasury bonds are the gold standard safe investment, and can be hedged or unhedged depending on a n investors goals.

The majority of J-reits are equities like, and do not act as a ballast in a portfolio.

https://g.co/finance/REIT:INDEXTYO?wind ... TYO%3A2621

Haystack wrote: ↑Thu Feb 03, 2022 4:13 am 1. Correlation between two assets is measured independently of an investor base assets. You seem to have your own definition that you are operating off of.

I'm not sure what you mean by this, but please reread what I wrote and the links I posted. As I tried to explain, when priced in yen, advanced market stocks and advanced market bonds are somewhat correlated.

Here's another link from the Japanese Government Pension fund, showing a correlation of 0.585. The data they used in their calculations goes back 25 years (p. 38 of this document).

2. You sources seem to be using only 10 years, which is not too useful.

See above.

Work from 2021 from the Pensions Officee seem to suggest that things are much more complicated, and that it depends on economic conditions. However, this work mostly focuses on domestic funds. https://www.gpif.go.jp/investment/20211 ... per_en.pdf
...
The majority of J-reits are equities like, and do not act as a ballast in a portfolio.

Firstly, that paper seems to be about J-REITs. I only mentioned J-REITs to say that they are weakly correlated with foreign stocks, I never suggested that they act as ballast. However, they might be worth considering as a diversifier because of their weak correlation.

3. Potato's and Tomatoes, 20 year US government treasury bonds are the gold standard safe investment, and can be hedged or unhedged depending on a n investors goals.

For US investors. For investors in Japan, currency risk makes them more volatile and more correlated with foreign stocks.

fools_gold wrote: ↑Thu Feb 03, 2022 6:27 am I'm not sure what you mean by this, but please reread what I wrote and the links I posted. As I tried to explain, when priced in yen, advanced market stocks and advanced market bonds are somewhat correlated.

Here's another link from the Japanese Government Pension fund, showing a correlation of 0.585. The data they used in their calculations goes back 25 years (p. 38 of this document).

I think my fundamental issue is your assertion about them not being correlated for Japanese investors. That simply doesn`t follow logically.

The lack of correlation between two things is held independent of other factors.

The low correlation between VOO and TLT does not change for Japanese investors. The significance of the assets, and how those assets may affect a Japanese portfolio may indeed differ, but the relationship between those two still remains constant.

They are not "uncorrelated" for a Japanese investor. That is all I am saying. Perhaps you intended to say "For Japanese investors currency risk presents complications when investing in foreign dementated sovereign bonds." And to that end, I included the paired TYO listed Hedged version.

I did not, and do not suggest OP buy these funds. It was simply an example. My actually suggestions were at the bottom of my originally post

I don`t disagree with you about JREITs or REITs as diversifiers. But OP was talking about bond fund choices. It would be a strange move for an MSCI ACWI investor to move away from marketcap.

Haystack wrote: ↑Thu Feb 03, 2022 9:07 am I think my fundamental issue is your assertion about them not being correlated for Japanese investors. That simply doesn`t follow logically.

The lack of correlation between two things is held independent of other factors.

You’re right in saying that the lack of correlation between two things is held independent of other factors. I believe the reason for the different correlations is because we’re actually comparing two different sets of variables.

The correlation coefficient is calculated using the returns of two different assets at set intervals over a period of time. On one hand, an American investor would be looking at the returns of stocks and bonds in the local currency, the USD. On the other hand, a Japanese investor would be using the currency-adjusted returns in yen. These returns are going to be different from the returns in the local currency, and we can thus it's not unreasonable to expect different correlation coefficients. The difference is going to be bigger when the currency returns are large in relation to the local currency returns of one or more of the assets, in this case bonds.

If that's not the case, how would you account for the positive correlations calculated by the GPIF and MUFJ?

They are not "uncorrelated" for a Japanese investor. That is all I am saying. Perhaps you intended to say "For Japanese investors currency risk presents complications when investing in foreign dementated sovereign bonds." And to that end, I included the paired TYO listed Hedged version.

I meant what I said and have provided links showing the positive correlation. However, I should have been clearer by saying "unhedged foreign stocks and bonds are somewhat correlated for Japanese investors" because the risk and returns of hedged bonds are more like domestic ones.

Yes, foreign currency denominated bonds do present complications. And they are the complications I've been talking about all along. That is, they are more volatile and more correlated with stocks than either domestic bonds or hedged alternatives.

It's not that hedged bonds are just an alternative for people worried about currency risk. It's that the currency risk of unhedged bonds makes them no longer act like bonds. If you really want something low-risk and uncorrelated to stocks then you're left with domestic or hedged bonds.

This guy seems to think unhedged foreign bonds aren't worth the trouble and I tend to agree with him.

fools_gold wrote: ↑Wed Feb 09, 2022 5:14 am


You’re right in saying that the lack of correlation between two things is held independent of other factors. I believe the reason for the different correlations is because we’re actually comparing two different sets of variables

Ah, I see. I suppose we were working off different understanding and measures.

It comes down to a belief in the belief or disbelief that yield will overcome currency risk for foreign bonds. An investors appetite for risk and the role of the bonds in a portfolio are key.

..........

In regards to your link, there are so many assumptions about returns and assumed risk by the author . The horizon was only measured at 5 years as well.

That article was from 2018. So over the last 5 years.

7-10 Year Treasury ETF Yen Basic (Up 5.3%)
Japan Bond ETF (Down 2%)

https://g.co/finance/1656:TYO?window=5Y ... TYO%3A2510

Assuming a monthly tsumitate, an etf like IEF certainly seemed like the better call!

Just going to gentle steer this thread firmly back on the "Simple" side of the tracks.

Using SBI. Adding to a regular NISA account. Made a purchase about one week ago.
I can see my available 2022 NISA balance has reduced by the amount invested. So all good there.

For the absolutely life of I can not find any record of the purchase on the site.

I'm sure that's just me being challenged but it's just not there in the 取引履歴
Imagine it's becuase it's hasn't Toried or Hikied yet.
I'd just like to know if you can see the order request anywhere on their epilepsy inducing site before it's watashimased to me.
It's bad enough I get flashbacks to my Kazaa days each time I log in.

TIA.