Correlation Between Applied Finance and Inflation-protected
Can any of the company-specific risk be diversified away by investing in both Applied Finance 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 Applied Finance and Inflation-protected into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Finance Explorer and Inflation Protected Bond Fund, you can compare the effects of market volatilities on Applied Finance 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 Applied Finance with a short position of Inflation-protected. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Finance and Inflation-protected.
Diversification Opportunities for Applied Finance and Inflation-protected
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Applied and Inflation-protected is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Applied Finance Explorer 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 Applied Finance 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 Applied Finance Explorer 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 Applied Finance i.e., Applied Finance and Inflation-protected go up and down completely randomly.
Pair Corralation between Applied Finance and Inflation-protected
Assuming the 90 days horizon Applied Finance Explorer is expected to under-perform the Inflation-protected. In addition to that, Applied Finance is 1.94 times more volatile than Inflation Protected Bond Fund. It trades about -0.2 of its total potential returns per unit of risk. Inflation Protected Bond Fund is currently generating about 0.11 per unit of volatility. If you would invest 1,012 in Inflation Protected Bond Fund on December 4, 2024 and sell it today you would earn a total of 9.00 from holding Inflation Protected Bond Fund or generate 0.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Finance Explorer vs. Inflation Protected Bond Fund
Performance |
| Timeline |
| Applied Finance Explorer |
| Inflation Protected |
Applied Finance and Inflation-protected Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Finance and Inflation-protected
The main advantage of trading using opposite Applied Finance and Inflation-protected positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Finance 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.| Applied Finance vs. Thrivent Small Cap | Applied Finance vs. Applied Finance Select | Applied Finance vs. Parnassus Endeavor Fund | Applied Finance vs. Queens Road Small |
| Inflation-protected vs. Pnc Emerging Markets | Inflation-protected vs. Hartford Schroders Emerging | Inflation-protected vs. Shelton Emerging Markets | Inflation-protected vs. Doubleline Emerging Markets |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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