Correlation Between Inflation Protected and Commodityrealreturn
Can any of the company-specific risk be diversified away by investing in both Inflation Protected and Commodityrealreturn 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 Commodityrealreturn 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 Commodityrealreturn Strategy Fund, you can compare the effects of market volatilities on Inflation Protected and Commodityrealreturn 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 Commodityrealreturn. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inflation Protected and Commodityrealreturn.
Diversification Opportunities for Inflation Protected and Commodityrealreturn
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Inflation and Commodityrealreturn is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Inflation Protected Bond Fund and Commodityrealreturn Strategy F in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commodityrealreturn 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 Commodityrealreturn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commodityrealreturn has no effect on the direction of Inflation Protected i.e., Inflation Protected and Commodityrealreturn go up and down completely randomly.
Pair Corralation between Inflation Protected and Commodityrealreturn
Assuming the 90 days horizon Inflation Protected Bond Fund is expected to generate 0.61 times more return on investment than Commodityrealreturn. However, Inflation Protected Bond Fund is 1.65 times less risky than Commodityrealreturn. It trades about 0.13 of its potential returns per unit of risk. Commodityrealreturn Strategy Fund is currently generating about -0.01 per unit of risk. If you would invest 976.00 in Inflation Protected Bond Fund on September 3, 2024 and sell it today you would earn a total of 80.00 from holding Inflation Protected Bond Fund or generate 8.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Inflation Protected Bond Fund vs. Commodityrealreturn Strategy F
Performance |
| Timeline |
| Inflation Protected |
| Commodityrealreturn |
Inflation Protected and Commodityrealreturn Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inflation Protected and Commodityrealreturn
The main advantage of trading using opposite Inflation Protected and Commodityrealreturn positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inflation Protected position performs unexpectedly, Commodityrealreturn 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 Commodityrealreturn will offset losses from the drop in Commodityrealreturn's long position.| Inflation Protected vs. First American Funds | Inflation Protected vs. Hsbc Treasury Money | Inflation Protected vs. Janus Investment | Inflation Protected vs. General Money Market |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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