Correlation Between Inflation Protected and Intermediate Term
Can any of the company-specific risk be diversified away by investing in both Inflation Protected and Intermediate Term 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 Intermediate Term 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 Intermediate Term Bond Fund, you can compare the effects of market volatilities on Inflation Protected and Intermediate Term 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 Intermediate Term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inflation Protected and Intermediate Term.
Diversification Opportunities for Inflation Protected and Intermediate Term
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Inflation and Intermediate is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Inflation Protected Bond Fund and Intermediate Term Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intermediate Term Bond 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 Intermediate Term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intermediate Term Bond has no effect on the direction of Inflation Protected i.e., Inflation Protected and Intermediate Term go up and down completely randomly.
Pair Corralation between Inflation Protected and Intermediate Term
Assuming the 90 days horizon Inflation Protected is expected to generate 1.01 times less return on investment than Intermediate Term. But when comparing it to its historical volatility, Inflation Protected Bond Fund is 1.05 times less risky than Intermediate Term. It trades about 0.15 of its potential returns per unit of risk. Intermediate Term Bond Fund is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 915.00 in Intermediate Term Bond Fund on September 12, 2024 and sell it today you would earn a total of 9.00 from holding Intermediate Term Bond Fund or generate 0.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Inflation Protected Bond Fund vs. Intermediate Term Bond Fund
Performance |
| Timeline |
| Inflation Protected |
| Intermediate Term Bond |
Inflation Protected and Intermediate Term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inflation Protected and Intermediate Term
The main advantage of trading using opposite Inflation Protected and Intermediate Term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inflation Protected position performs unexpectedly, Intermediate Term 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 Intermediate Term will offset losses from the drop in Intermediate Term's long position.| Inflation Protected vs. Aqr Large Cap | Inflation Protected vs. Pace Large Growth | Inflation Protected vs. Old Westbury Large | Inflation Protected vs. Rational Strategic Allocation |
| Intermediate Term vs. Gamco Global Gold | Intermediate Term vs. International Investors Gold | Intermediate Term vs. Precious Metals And | Intermediate Term vs. Gabelli Gold Fund |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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