Correlation Between Inflation-linked and Global Core
Can any of the company-specific risk be diversified away by investing in both Inflation-linked and Global Core 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 Inflation-linked and Global Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inflation Linked Fixed Income and Global E Portfolio, you can compare the effects of market volatilities on Inflation-linked and Global Core 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 Inflation-linked with a short position of Global Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inflation-linked and Global Core.
Diversification Opportunities for Inflation-linked and Global Core
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Inflation-linked and Global is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Inflation Linked Fixed Income and Global E Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global E Portfolio and 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 Inflation Linked Fixed Income are associated (or correlated) with Global Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global E Portfolio has no effect on the direction of Inflation-linked i.e., Inflation-linked and Global Core go up and down completely randomly.
Pair Corralation between Inflation-linked and Global Core
Assuming the 90 days horizon Inflation-linked is expected to generate 10.52 times less return on investment than Global Core. But when comparing it to its historical volatility, Inflation Linked Fixed Income is 2.9 times less risky than Global Core. It trades about 0.04 of its potential returns per unit of risk. Global E Portfolio is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2,114 in Global E Portfolio on August 31, 2024 and sell it today you would earn a total of 55.00 from holding Global E Portfolio or generate 2.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Inflation Linked Fixed Income vs. Global E Portfolio
Performance |
| Timeline |
| Inflation Linked Fixed |
| Global E Portfolio |
Inflation-linked and Global Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inflation-linked and Global Core
The main advantage of trading using opposite Inflation-linked and Global Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inflation-linked position performs unexpectedly, Global Core 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 Core will offset losses from the drop in Global Core's long position.| Inflation-linked vs. Artisan Emerging Markets | Inflation-linked vs. Harbor Diversified International | Inflation-linked vs. Locorr Market Trend | Inflation-linked vs. Western Asset Diversified |
| Global Core vs. Ab All Market | Global Core vs. Transamerica Emerging Markets | Global Core vs. Doubleline Emerging Markets | Global Core vs. Pnc Emerging Markets |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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