Correlation Between Global Diversified and Inflation Protection
Can any of the company-specific risk be diversified away by investing in both Global Diversified and Inflation Protection 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 Global Diversified and Inflation Protection into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Diversified Income and Inflation Protection Fund, you can compare the effects of market volatilities on Global Diversified and Inflation Protection 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 Global Diversified with a short position of Inflation Protection. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Diversified and Inflation Protection.
Diversification Opportunities for Global Diversified and Inflation Protection
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Global and Inflation is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Global Diversified Income and Inflation Protection Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inflation Protection and Global Diversified 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 Global Diversified Income are associated (or correlated) with Inflation Protection. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inflation Protection has no effect on the direction of Global Diversified i.e., Global Diversified and Inflation Protection go up and down completely randomly.
Pair Corralation between Global Diversified and Inflation Protection
Assuming the 90 days horizon Global Diversified is expected to generate 2.21 times less return on investment than Inflation Protection. But when comparing it to its historical volatility, Global Diversified Income is 1.47 times less risky than Inflation Protection. It trades about 0.2 of its potential returns per unit of risk. Inflation Protection Fund is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 712.00 in Inflation Protection Fund on November 30, 2024 and sell it today you would earn a total of 23.00 from holding Inflation Protection Fund or generate 3.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Diversified Income vs. Inflation Protection Fund
Performance |
| Timeline |
| Global Diversified Income |
| Inflation Protection |
Global Diversified and Inflation Protection Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Diversified and Inflation Protection
The main advantage of trading using opposite Global Diversified and Inflation Protection positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Diversified position performs unexpectedly, Inflation Protection 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 Protection will offset losses from the drop in Inflation Protection's long position.| Global Diversified vs. Gold And Precious | Global Diversified vs. Gabelli Gold Fund | Global Diversified vs. Fidelity Advisor Gold | Global Diversified vs. Global 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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