Correlation Between Industrials Ultrasector and Cref Inflation
Can any of the company-specific risk be diversified away by investing in both Industrials Ultrasector and Cref Inflation 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 Industrials Ultrasector and Cref Inflation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Industrials Ultrasector Profund and Cref Inflation Linked Bond, you can compare the effects of market volatilities on Industrials Ultrasector and Cref Inflation 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 Industrials Ultrasector with a short position of Cref Inflation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrials Ultrasector and Cref Inflation.
Diversification Opportunities for Industrials Ultrasector and Cref Inflation
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Industrials and Cref is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Industrials Ultrasector Profun and Cref Inflation Linked Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cref Inflation Linked and Industrials Ultrasector 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 Industrials Ultrasector Profund are associated (or correlated) with Cref Inflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cref Inflation Linked has no effect on the direction of Industrials Ultrasector i.e., Industrials Ultrasector and Cref Inflation go up and down completely randomly.
Pair Corralation between Industrials Ultrasector and Cref Inflation
Assuming the 90 days horizon Industrials Ultrasector Profund is expected to under-perform the Cref Inflation. In addition to that, Industrials Ultrasector is 8.26 times more volatile than Cref Inflation Linked Bond. It trades about -0.31 of its total potential returns per unit of risk. Cref Inflation Linked Bond is currently generating about -0.22 per unit of volatility. If you would invest 8,559 in Cref Inflation Linked Bond on October 12, 2024 and sell it today you would lose (66.00) from holding Cref Inflation Linked Bond or give up 0.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Industrials Ultrasector Profun vs. Cref Inflation Linked Bond
Performance |
| Timeline |
| Industrials Ultrasector |
| Cref Inflation Linked |
Industrials Ultrasector and Cref Inflation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Industrials Ultrasector and Cref Inflation
The main advantage of trading using opposite Industrials Ultrasector and Cref Inflation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrials Ultrasector position performs unexpectedly, Cref Inflation 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 Cref Inflation will offset losses from the drop in Cref Inflation's long position.The idea behind Industrials Ultrasector Profund and Cref Inflation Linked Bond pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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