Correlation Between Global Social and Inflation Protected
Can any of the company-specific risk be diversified away by investing in both Global Social and Inflation Protected 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 Global Social and Inflation Protected into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Social Awareness and Inflation Protected Fund, you can compare the effects of market volatilities on Global Social and Inflation Protected 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 Global Social with a short position of Inflation Protected. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Social and Inflation Protected.
Diversification Opportunities for Global Social and Inflation Protected
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Global and Inflation is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Global Social Awareness and Inflation Protected Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inflation Protected and Global Social 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 Global Social Awareness are associated (or correlated) with Inflation Protected. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inflation Protected has no effect on the direction of Global Social i.e., Global Social and Inflation Protected go up and down completely randomly.
Pair Corralation between Global Social and Inflation Protected
Assuming the 90 days horizon Global Social Awareness is expected to under-perform the Inflation Protected. In addition to that, Global Social is 2.89 times more volatile than Inflation Protected Fund. It trades about -0.17 of its total potential returns per unit of risk. Inflation Protected Fund is currently generating about -0.02 per unit of volatility. If you would invest 859.00 in Inflation Protected Fund on August 27, 2024 and sell it today you would lose (1.00) from holding Inflation Protected Fund or give up 0.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Social Awareness vs. Inflation Protected Fund
Performance |
| Timeline |
| Global Social Awareness |
| Inflation Protected |
Global Social and Inflation Protected Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Social and Inflation Protected
The main advantage of trading using opposite Global Social and Inflation Protected positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Social position performs unexpectedly, Inflation Protected 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 Protected will offset losses from the drop in Inflation Protected's long position.| Global Social vs. Mid Cap Index | Global Social vs. Mid Cap Strategic | Global Social vs. Valic Company I | Global Social vs. Valic Company I |
| Inflation Protected vs. Mid Cap Index | Inflation Protected vs. Mid Cap Strategic | Inflation Protected vs. Valic Company I | Inflation Protected vs. Valic Company I |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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