Correlation Between Value Fund and Inflation-adjusted
Can any of the company-specific risk be diversified away by investing in both Value Fund and Inflation-adjusted 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 Value Fund and Inflation-adjusted into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Value Fund A and Inflation Adjusted Bond Fund, you can compare the effects of market volatilities on Value Fund and Inflation-adjusted 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 Value Fund with a short position of Inflation-adjusted. Check out your portfolio center. Please also check ongoing floating volatility patterns of Value Fund and Inflation-adjusted.
Diversification Opportunities for Value Fund and Inflation-adjusted
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Value and Inflation-adjusted is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Value Fund A and Inflation Adjusted Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inflation Adjusted Bond and Value Fund 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 Value Fund A are associated (or correlated) with Inflation-adjusted. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inflation Adjusted Bond has no effect on the direction of Value Fund i.e., Value Fund and Inflation-adjusted go up and down completely randomly.
Pair Corralation between Value Fund and Inflation-adjusted
Assuming the 90 days horizon Value Fund A is expected to under-perform the Inflation-adjusted. In addition to that, Value Fund is 4.98 times more volatile than Inflation Adjusted Bond Fund. It trades about -0.11 of its total potential returns per unit of risk. Inflation Adjusted Bond Fund is currently generating about 0.03 per unit of volatility. If you would invest 1,044 in Inflation Adjusted Bond Fund on November 7, 2024 and sell it today you would earn a total of 5.00 from holding Inflation Adjusted Bond Fund or generate 0.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Value Fund A vs. Inflation Adjusted Bond Fund
Performance |
| Timeline |
| Value Fund A |
| Inflation Adjusted Bond |
Value Fund and Inflation-adjusted Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Value Fund and Inflation-adjusted
The main advantage of trading using opposite Value Fund and Inflation-adjusted positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value Fund position performs unexpectedly, Inflation-adjusted 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-adjusted will offset losses from the drop in Inflation-adjusted's long position.| Value Fund vs. Delaware Limited Term Diversified | Value Fund vs. Harbor Diversified International | Value Fund vs. American Century Diversified | Value Fund vs. Madison Diversified Income |
| Inflation-adjusted vs. Mid Cap Value | Inflation-adjusted vs. Equity Growth Fund | Inflation-adjusted vs. Income Growth Fund | Inflation-adjusted vs. Diversified Bond Fund |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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