Correlation Between Inflation-protected and Preferred Securities
Can any of the company-specific risk be diversified away by investing in both Inflation-protected and Preferred Securities 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 Preferred Securities 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 Preferred Securities Fund, you can compare the effects of market volatilities on Inflation-protected and Preferred Securities 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 Preferred Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inflation-protected and Preferred Securities.
Diversification Opportunities for Inflation-protected and Preferred Securities
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Inflation-protected and Preferred is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Inflation Protected Bond Fund and Preferred Securities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Preferred Securities 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 Preferred Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Preferred Securities has no effect on the direction of Inflation-protected i.e., Inflation-protected and Preferred Securities go up and down completely randomly.
Pair Corralation between Inflation-protected and Preferred Securities
Assuming the 90 days horizon Inflation Protected Bond Fund is expected to generate 3.13 times more return on investment than Preferred Securities. However, Inflation-protected is 3.13 times more volatile than Preferred Securities Fund. It trades about 0.11 of its potential returns per unit of risk. Preferred Securities Fund is currently generating about 0.29 per unit of risk. If you would invest 909.00 in Inflation Protected Bond Fund on September 4, 2024 and sell it today you would earn a total of 125.00 from holding Inflation Protected Bond Fund or generate 13.75% 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. Preferred Securities Fund
Performance |
| Timeline |
| Inflation Protected |
| Preferred Securities |
Inflation-protected and Preferred Securities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inflation-protected and Preferred Securities
The main advantage of trading using opposite Inflation-protected and Preferred Securities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inflation-protected position performs unexpectedly, Preferred Securities 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 Preferred Securities will offset losses from the drop in Preferred Securities' long position.| Inflation-protected vs. Wells Fargo Advantage | Inflation-protected vs. Wells Fargo Ultra | Inflation-protected vs. Wells Fargo Ultra | Inflation-protected vs. Wells Fargo Emerging |
| Preferred Securities vs. Aqr Managed Futures | Preferred Securities vs. Aqr Managed Futures | Preferred Securities vs. Inflation Protected Bond Fund | Preferred Securities vs. Tiaa Cref Inflation Linked Bond |
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.
Other Complementary Tools
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes |