Correlation Between Global Franchise and Inflation Linked
Can any of the company-specific risk be diversified away by investing in both Global Franchise and Inflation Linked 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 Franchise and Inflation Linked into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Franchise Portfolio and Inflation Linked Fixed Income, you can compare the effects of market volatilities on Global Franchise and Inflation Linked 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 Franchise with a short position of Inflation Linked. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Franchise and Inflation Linked.
Diversification Opportunities for Global Franchise and Inflation Linked
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Global and Inflation is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Global Franchise Portfolio and Inflation Linked Fixed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inflation Linked Fixed and Global Franchise 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 Franchise Portfolio are associated (or correlated) with Inflation Linked. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inflation Linked Fixed has no effect on the direction of Global Franchise i.e., Global Franchise and Inflation Linked go up and down completely randomly.
Pair Corralation between Global Franchise and Inflation Linked
Assuming the 90 days horizon Global Franchise Portfolio is expected to under-perform the Inflation Linked. In addition to that, Global Franchise is 2.33 times more volatile than Inflation Linked Fixed Income. It trades about -0.03 of its total potential returns per unit of risk. Inflation Linked Fixed Income is currently generating about 0.26 per unit of volatility. If you would invest 814.00 in Inflation Linked Fixed Income on June 11, 2025 and sell it today you would earn a total of 32.00 from holding Inflation Linked Fixed Income or generate 3.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Franchise Portfolio vs. Inflation Linked Fixed Income
Performance |
| Timeline |
| Global Franchise Por |
| Inflation Linked Fixed |
Global Franchise and Inflation Linked Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Franchise and Inflation Linked
The main advantage of trading using opposite Global Franchise and Inflation Linked positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Franchise position performs unexpectedly, Inflation Linked 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 Linked will offset losses from the drop in Inflation Linked's long position.| Global Franchise vs. Emerging Markets Equity | Global Franchise vs. Global Fixed Income | Global Franchise vs. Global Fixed Income | Global Franchise vs. Global Fixed Income |
| Inflation Linked vs. Emerging Markets Equity | Inflation Linked vs. Global Fixed Income | Inflation Linked vs. Global Fixed Income | Inflation Linked vs. Global Fixed Income |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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