Correlation Between Inflation Protected and Capital Management
Can any of the company-specific risk be diversified away by investing in both Inflation Protected and Capital Management 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 Capital Management 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 Capital Management Small Cap, you can compare the effects of market volatilities on Inflation Protected and Capital Management 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 Capital Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inflation Protected and Capital Management.
Diversification Opportunities for Inflation Protected and Capital Management
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Inflation and Capital is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Inflation Protected Bond Fund and Capital Management Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Management 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 Capital Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Management has no effect on the direction of Inflation Protected i.e., Inflation Protected and Capital Management go up and down completely randomly.
Pair Corralation between Inflation Protected and Capital Management
If you would invest 1,032 in Inflation Protected Bond Fund on October 24, 2024 and sell it today you would earn a total of 2.00 from holding Inflation Protected Bond Fund or generate 0.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 1.69% |
| Values | Daily Returns |
Inflation Protected Bond Fund vs. Capital Management Small Cap
Performance |
| Timeline |
| Inflation Protected |
| Capital Management |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Inflation Protected and Capital Management Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inflation Protected and Capital Management
The main advantage of trading using opposite Inflation Protected and Capital Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inflation Protected position performs unexpectedly, Capital Management 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 Capital Management will offset losses from the drop in Capital Management's long position.The idea behind Inflation Protected Bond Fund and Capital Management Small Cap 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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