Correlation Between Moderate Balanced and Inflation Protection
Can any of the company-specific risk be diversified away by investing in both Moderate Balanced 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 Moderate Balanced and Inflation Protection into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Moderate Balanced Allocation and Inflation Protection Fund, you can compare the effects of market volatilities on Moderate Balanced 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 Moderate Balanced with a short position of Inflation Protection. Check out your portfolio center. Please also check ongoing floating volatility patterns of Moderate Balanced and Inflation Protection.
Diversification Opportunities for Moderate Balanced and Inflation Protection
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Moderate and Inflation is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Moderate Balanced Allocation and Inflation Protection Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inflation Protection and Moderate Balanced 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 Moderate Balanced Allocation 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 Moderate Balanced i.e., Moderate Balanced and Inflation Protection go up and down completely randomly.
Pair Corralation between Moderate Balanced and Inflation Protection
Assuming the 90 days horizon Moderate Balanced Allocation is expected to generate 2.28 times more return on investment than Inflation Protection. However, Moderate Balanced is 2.28 times more volatile than Inflation Protection Fund. It trades about 0.11 of its potential returns per unit of risk. Inflation Protection Fund is currently generating about -0.01 per unit of risk. If you would invest 1,113 in Moderate Balanced Allocation on November 3, 2024 and sell it today you would earn a total of 93.00 from holding Moderate Balanced Allocation or generate 8.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Moderate Balanced Allocation vs. Inflation Protection Fund
Performance |
| Timeline |
| Moderate Balanced |
| Inflation Protection |
Moderate Balanced and Inflation Protection Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Moderate Balanced and Inflation Protection
The main advantage of trading using opposite Moderate Balanced and Inflation Protection positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Moderate Balanced 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.| Moderate Balanced vs. Fidelity Sai Convertible | Moderate Balanced vs. Columbia Convertible Securities | Moderate Balanced vs. Advent Claymore Convertible | Moderate Balanced vs. Putnam Convertible Securities |
| Inflation Protection vs. Cmg Ultra Short | Inflation Protection vs. Alpine Ultra Short | Inflation Protection vs. Blackrock Global Longshort | Inflation Protection vs. Siit Ultra Short |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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