Correlation Between Ab Bond and Inflation-protected
Can any of the company-specific risk be diversified away by investing in both Ab Bond and Inflation-protected 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 Ab Bond and Inflation-protected into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ab Bond Inflation and Inflation Protected Bond Fund, you can compare the effects of market volatilities on Ab Bond and Inflation-protected 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 Ab Bond with a short position of Inflation-protected. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Bond and Inflation-protected.
Diversification Opportunities for Ab Bond and Inflation-protected
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ABNCX and Inflation-protected is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Ab Bond Inflation and Inflation Protected Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inflation Protected and Ab 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 Ab Bond Inflation are associated (or correlated) with Inflation-protected. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inflation Protected has no effect on the direction of Ab Bond i.e., Ab Bond and Inflation-protected go up and down completely randomly.
Pair Corralation between Ab Bond and Inflation-protected
Assuming the 90 days horizon Ab Bond Inflation is expected to generate 0.3 times more return on investment than Inflation-protected. However, Ab Bond Inflation is 3.3 times less risky than Inflation-protected. It trades about -0.25 of its potential returns per unit of risk. Inflation Protected Bond Fund is currently generating about -0.27 per unit of risk. If you would invest 1,005 in Ab Bond Inflation on October 10, 2024 and sell it today you would lose (10.00) from holding Ab Bond Inflation or give up 1.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ab Bond Inflation vs. Inflation Protected Bond Fund
Performance |
| Timeline |
| Ab Bond Inflation |
| Inflation Protected |
Ab Bond and Inflation-protected Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ab Bond and Inflation-protected
The main advantage of trading using opposite Ab Bond and Inflation-protected positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Bond position performs unexpectedly, Inflation-protected 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 Inflation-protected will offset losses from the drop in Inflation-protected's long position.| Ab Bond vs. Glg Intl Small | Ab Bond vs. Kinetics Small Cap | Ab Bond vs. Tax Managed Mid Small | Ab Bond vs. Hunter Small Cap |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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