Correlation Between Cref Inflation-linked and Global Diversified
Can any of the company-specific risk be diversified away by investing in both Cref Inflation-linked and Global Diversified 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 Global Diversified 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 Global Diversified Income, you can compare the effects of market volatilities on Cref Inflation-linked and Global Diversified 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 Global Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cref Inflation-linked and Global Diversified.
Diversification Opportunities for Cref Inflation-linked and Global Diversified
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between CREF and Global is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Cref Inflation Linked Bond and Global Diversified Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Diversified Income 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 Global Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Diversified Income has no effect on the direction of Cref Inflation-linked i.e., Cref Inflation-linked and Global Diversified go up and down completely randomly.
Pair Corralation between Cref Inflation-linked and Global Diversified
Assuming the 90 days trading horizon Cref Inflation-linked is expected to generate 1.21 times less return on investment than Global Diversified. In addition to that, Cref Inflation-linked is 1.05 times more volatile than Global Diversified Income. It trades about 0.11 of its total potential returns per unit of risk. Global Diversified Income is currently generating about 0.14 per unit of volatility. If you would invest 1,112 in Global Diversified Income on September 3, 2024 and sell it today you would earn a total of 83.00 from holding Global Diversified Income or generate 7.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cref Inflation Linked Bond vs. Global Diversified Income
Performance |
| Timeline |
| Cref Inflation Linked |
| Global Diversified Income |
Cref Inflation-linked and Global Diversified Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cref Inflation-linked and Global Diversified
The main advantage of trading using opposite Cref Inflation-linked and Global Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cref Inflation-linked position performs unexpectedly, Global Diversified 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 Global Diversified will offset losses from the drop in Global Diversified's long position.The idea behind Cref Inflation Linked Bond and Global Diversified Income 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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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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