Correlation Between Sea and CREF Inflation
Can any of the company-specific risk be diversified away by investing in both Sea and CREF Inflation 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 Sea and CREF Inflation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sea and CREF Inflation Linked Bond, you can compare the effects of market volatilities on Sea and CREF Inflation 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 Sea with a short position of CREF Inflation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sea and CREF Inflation.
Diversification Opportunities for Sea and CREF Inflation
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sea and CREF is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Sea and CREF Inflation Linked Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CREF Inflation Linked and Sea 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 Sea are associated (or correlated) with CREF Inflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CREF Inflation Linked has no effect on the direction of Sea i.e., Sea and CREF Inflation go up and down completely randomly.
Pair Corralation between Sea and CREF Inflation
Allowing for the 90-day total investment horizon Sea is expected to generate 13.51 times more return on investment than CREF Inflation. However, Sea is 13.51 times more volatile than CREF Inflation Linked Bond. It trades about 0.07 of its potential returns per unit of risk. CREF Inflation Linked Bond is currently generating about 0.07 per unit of risk. If you would invest 5,025 in Sea on September 14, 2024 and sell it today you would earn a total of 6,704 from holding Sea or generate 133.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.19% |
| Values | Daily Returns |
Sea vs. CREF Inflation Linked Bond
Performance |
| Timeline |
| Sea |
| CREF Inflation Linked |
Sea and CREF Inflation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sea and CREF Inflation
The main advantage of trading using opposite Sea and CREF Inflation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sea position performs unexpectedly, CREF Inflation 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 CREF Inflation will offset losses from the drop in CREF Inflation's long position.The idea behind Sea and CREF Inflation Linked Bond 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.| CREF Inflation vs. Park Ohio Holdings | CREF Inflation vs. Parker Hannifin | CREF Inflation vs. MGIC Investment Corp | CREF Inflation vs. Western Asset Investment |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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