Correlation Between Cref Inflation-linked and Guidemark(r) World

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Can any of the company-specific risk be diversified away by investing in both Cref Inflation-linked and Guidemark(r) World 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 Cref Inflation-linked and Guidemark(r) World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cref Inflation Linked Bond and Guidemark World Ex Us, you can compare the effects of market volatilities on Cref Inflation-linked and Guidemark(r) World 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 Cref Inflation-linked with a short position of Guidemark(r) World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cref Inflation-linked and Guidemark(r) World.

Diversification Opportunities for Cref Inflation-linked and Guidemark(r) World

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between CREF and Guidemark(r) is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Cref Inflation Linked Bond and Guidemark World Ex Us in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidemark World Ex and Cref Inflation-linked 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 Cref Inflation Linked Bond are associated (or correlated) with Guidemark(r) World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidemark World Ex has no effect on the direction of Cref Inflation-linked i.e., Cref Inflation-linked and Guidemark(r) World go up and down completely randomly.

Pair Corralation between Cref Inflation-linked and Guidemark(r) World

Assuming the 90 days trading horizon Cref Inflation-linked is expected to generate 1.2 times less return on investment than Guidemark(r) World. But when comparing it to its historical volatility, Cref Inflation Linked Bond is 4.3 times less risky than Guidemark(r) World. It trades about 0.2 of its potential returns per unit of risk. Guidemark World Ex Us is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,097  in Guidemark World Ex Us on September 4, 2024 and sell it today you would earn a total of  9.00  from holding Guidemark World Ex Us or generate 0.82% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy95.24%
ValuesDaily Returns

Cref Inflation Linked Bond  vs.  Guidemark World Ex Us

 Performance 
       Timeline  
Cref Inflation Linked 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Cref Inflation Linked Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Cref Inflation-linked is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Guidemark World Ex 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Guidemark World Ex Us has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Guidemark(r) World is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Cref Inflation-linked and Guidemark(r) World Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cref Inflation-linked and Guidemark(r) World

The main advantage of trading using opposite Cref Inflation-linked and Guidemark(r) World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cref Inflation-linked position performs unexpectedly, Guidemark(r) World 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 Guidemark(r) World will offset losses from the drop in Guidemark(r) World's long position.
The idea behind Cref Inflation Linked Bond and Guidemark World Ex Us pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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