Correlation Between Real Return and Total Return
Can any of the company-specific risk be diversified away by investing in both Real Return and Total Return 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 Total Return 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 Total Return Fund, you can compare the effects of market volatilities on Real Return and Total Return 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 Total Return. Check out your portfolio center. Please also check ongoing floating volatility patterns of Real Return and Total Return.
Diversification Opportunities for Real Return and Total Return
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Real and Total is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Real Return Fund and Total Return Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Return 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 Total Return. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Return has no effect on the direction of Real Return i.e., Real Return and Total Return go up and down completely randomly.
Pair Corralation between Real Return and Total Return
Assuming the 90 days horizon Real Return Fund is expected to generate 0.72 times more return on investment than Total Return. However, Real Return Fund is 1.39 times less risky than Total Return. It trades about 0.24 of its potential returns per unit of risk. Total Return Fund is currently generating about 0.05 per unit of risk. If you would invest 998.00 in Real Return Fund on November 3, 2024 and sell it today you would earn a total of 13.00 from holding Real Return Fund or generate 1.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Real Return Fund vs. Total Return Fund
Performance |
| Timeline |
| Real Return Fund |
| Total Return |
Real Return and Total Return Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Real Return and Total Return
The main advantage of trading using opposite Real Return and Total Return positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Real Return position performs unexpectedly, Total Return 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 Total Return will offset losses from the drop in Total Return's long position.| Real Return vs. Oklahoma College Savings | Real Return vs. Franklin Small Cap | Real Return vs. Hunter Small Cap | Real Return vs. Praxis Small Cap |
| Total Return vs. Vanguard Institutional Index | Total Return vs. Dodge Stock Fund | Total Return vs. Europacific Growth Fund | Total Return vs. Real Return 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
Other Complementary Tools
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| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Fundamental Analysis View fundamental data based on most recent published financial statements |