Correlation Between Inflation-protected and Baron Real
Can any of the company-specific risk be diversified away by investing in both Inflation-protected and Baron Real 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-protected and Baron Real into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inflation Protected Bond Fund and Baron Real Estate, you can compare the effects of market volatilities on Inflation-protected and Baron Real 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-protected with a short position of Baron Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inflation-protected and Baron Real.
Diversification Opportunities for Inflation-protected and Baron Real
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Inflation-protected and Baron is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Inflation Protected Bond Fund and Baron Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Real Estate and Inflation-protected 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 Protected Bond Fund are associated (or correlated) with Baron Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Real Estate has no effect on the direction of Inflation-protected i.e., Inflation-protected and Baron Real go up and down completely randomly.
Pair Corralation between Inflation-protected and Baron Real
Assuming the 90 days horizon Inflation Protected Bond Fund is expected to generate 0.5 times more return on investment than Baron Real. However, Inflation Protected Bond Fund is 2.0 times less risky than Baron Real. It trades about -0.27 of its potential returns per unit of risk. Baron Real Estate is currently generating about -0.23 per unit of risk. If you would invest 1,057 in Inflation Protected Bond Fund on October 10, 2024 and sell it today you would lose (37.00) from holding Inflation Protected Bond Fund or give up 3.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Inflation Protected Bond Fund vs. Baron Real Estate
Performance |
| Timeline |
| Inflation Protected |
| Baron Real Estate |
Inflation-protected and Baron Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inflation-protected and Baron Real
The main advantage of trading using opposite Inflation-protected and Baron Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inflation-protected position performs unexpectedly, Baron Real 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 Baron Real will offset losses from the drop in Baron Real's long position.The idea behind Inflation Protected Bond Fund and Baron Real Estate 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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