Correlation Between Inflation-protected and Tiaa-cref Inflation-linked
Can any of the company-specific risk be diversified away by investing in both Inflation-protected and Tiaa-cref Inflation-linked 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 Tiaa-cref Inflation-linked 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 Tiaa Cref Inflation Linked Bond, you can compare the effects of market volatilities on Inflation-protected and Tiaa-cref Inflation-linked 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 Tiaa-cref Inflation-linked. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inflation-protected and Tiaa-cref Inflation-linked.
Diversification Opportunities for Inflation-protected and Tiaa-cref Inflation-linked
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Inflation-protected and Tiaa-cref is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Inflation Protected Bond Fund and Tiaa Cref Inflation Linked Bon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tiaa-cref Inflation-linked 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 Tiaa-cref Inflation-linked. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tiaa-cref Inflation-linked has no effect on the direction of Inflation-protected i.e., Inflation-protected and Tiaa-cref Inflation-linked go up and down completely randomly.
Pair Corralation between Inflation-protected and Tiaa-cref Inflation-linked
Assuming the 90 days horizon Inflation Protected Bond Fund is expected to under-perform the Tiaa-cref Inflation-linked. In addition to that, Inflation-protected is 3.58 times more volatile than Tiaa Cref Inflation Linked Bond. It trades about -0.27 of its total potential returns per unit of risk. Tiaa Cref Inflation Linked Bond is currently generating about -0.24 per unit of volatility. If you would invest 1,057 in Tiaa Cref Inflation Linked Bond on October 10, 2024 and sell it today you would lose (9.00) from holding Tiaa Cref Inflation Linked Bond or give up 0.85% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Inflation Protected Bond Fund vs. Tiaa Cref Inflation Linked Bon
Performance |
Timeline |
Inflation Protected |
Tiaa-cref Inflation-linked |
Inflation-protected and Tiaa-cref Inflation-linked Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Inflation-protected and Tiaa-cref Inflation-linked
The main advantage of trading using opposite Inflation-protected and Tiaa-cref Inflation-linked positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inflation-protected position performs unexpectedly, Tiaa-cref Inflation-linked 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 Tiaa-cref Inflation-linked will offset losses from the drop in Tiaa-cref Inflation-linked's long position.The idea behind Inflation Protected Bond Fund and Tiaa 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.
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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