Correlation Between Inflation-adjusted and Real Assets
Can any of the company-specific risk be diversified away by investing in both Inflation-adjusted and Real Assets 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 Inflation-adjusted and Real Assets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inflation Adjusted Bond Fund and Real Assets Portfolio, you can compare the effects of market volatilities on Inflation-adjusted and Real Assets 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 Inflation-adjusted with a short position of Real Assets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inflation-adjusted and Real Assets.
Diversification Opportunities for Inflation-adjusted and Real Assets
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Inflation-adjusted and Real is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Inflation Adjusted Bond Fund and Real Assets Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Assets Portfolio and Inflation-adjusted 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 Inflation Adjusted Bond Fund are associated (or correlated) with Real Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Assets Portfolio has no effect on the direction of Inflation-adjusted i.e., Inflation-adjusted and Real Assets go up and down completely randomly.
Pair Corralation between Inflation-adjusted and Real Assets
Assuming the 90 days horizon Inflation Adjusted Bond Fund is expected to generate 0.44 times more return on investment than Real Assets. However, Inflation Adjusted Bond Fund is 2.3 times less risky than Real Assets. It trades about -0.35 of its potential returns per unit of risk. Real Assets Portfolio is currently generating about -0.25 per unit of risk. If you would invest 1,049 in Inflation Adjusted Bond Fund on October 11, 2024 and sell it today you would lose (17.00) from holding Inflation Adjusted Bond Fund or give up 1.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Inflation Adjusted Bond Fund vs. Real Assets Portfolio
Performance |
| Timeline |
| Inflation Adjusted Bond |
| Real Assets Portfolio |
Inflation-adjusted and Real Assets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inflation-adjusted and Real Assets
The main advantage of trading using opposite Inflation-adjusted and Real Assets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inflation-adjusted position performs unexpectedly, Real Assets 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 Real Assets will offset losses from the drop in Real Assets' long position.| Inflation-adjusted vs. Pnc Balanced Allocation | Inflation-adjusted vs. Alternative Asset Allocation | Inflation-adjusted vs. Pace Large Growth | Inflation-adjusted vs. Alliancebernstein Global Highome |
| Real Assets vs. Altegris Futures Evolution | Real Assets vs. Inflation Adjusted Bond Fund | Real Assets vs. Fidelity Sai Inflationfocused | Real Assets vs. Inflation Protected Bond Fund |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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