Correlation Between Real Return and Inflation Adjusted
Can any of the company-specific risk be diversified away by investing in both Real Return and Inflation Adjusted 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 Real Return and Inflation Adjusted into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Real Return Fund and Inflation Adjusted Bond Fund, you can compare the effects of market volatilities on Real Return and Inflation Adjusted 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 Real Return with a short position of Inflation Adjusted. Check out your portfolio center. Please also check ongoing floating volatility patterns of Real Return and Inflation Adjusted.
Diversification Opportunities for Real Return and Inflation Adjusted
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Real and Inflation is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Real Return Fund and Inflation Adjusted Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inflation Adjusted Bond and Real Return 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 Real Return Fund are associated (or correlated) with Inflation Adjusted. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inflation Adjusted Bond has no effect on the direction of Real Return i.e., Real Return and Inflation Adjusted go up and down completely randomly.
Pair Corralation between Real Return and Inflation Adjusted
Assuming the 90 days horizon Real Return Fund is expected to under-perform the Inflation Adjusted. In addition to that, Real Return is 1.02 times more volatile than Inflation Adjusted Bond Fund. It trades about -0.1 of its total potential returns per unit of risk. Inflation Adjusted Bond Fund is currently generating about -0.09 per unit of volatility. If you would invest 1,067 in Inflation Adjusted Bond Fund on August 24, 2024 and sell it today you would lose (5.00) from holding Inflation Adjusted Bond Fund or give up 0.47% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Real Return Fund vs. Inflation Adjusted Bond Fund
Performance |
| Timeline |
| Real Return Fund |
| Inflation Adjusted Bond |
Real Return and Inflation Adjusted Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Real Return and Inflation Adjusted
The main advantage of trading using opposite Real Return and Inflation Adjusted positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Real Return position performs unexpectedly, Inflation Adjusted 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 Inflation Adjusted will offset losses from the drop in Inflation Adjusted's long position.| Real Return vs. Lord Abbett Vertible | Real Return vs. Franklin Vertible Securities | Real Return vs. Invesco Vertible Securities | Real Return vs. Rationalpier 88 Convertible |
| Inflation Adjusted vs. Calvert High Yield | Inflation Adjusted vs. Alliancebernstein Global High | Inflation Adjusted vs. Ab High Income | Inflation Adjusted vs. Artisan High Income |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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