Correlation Between Cref Inflation-linked and Inflation-adjusted
Can any of the company-specific risk be diversified away by investing in both Cref Inflation-linked 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 Cref Inflation-linked and Inflation-adjusted into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cref Inflation Linked Bond and Inflation Adjusted Bond Fund, you can compare the effects of market volatilities on Cref Inflation-linked 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 Cref Inflation-linked with a short position of Inflation-adjusted. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cref Inflation-linked and Inflation-adjusted.
Diversification Opportunities for Cref Inflation-linked and Inflation-adjusted
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cref and Inflation-adjusted is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Cref Inflation Linked Bond 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 Cref 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 Cref Inflation Linked Bond 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 Cref Inflation-linked i.e., Cref Inflation-linked and Inflation-adjusted go up and down completely randomly.
Pair Corralation between Cref Inflation-linked and Inflation-adjusted
Assuming the 90 days trading horizon Cref Inflation Linked Bond is expected to generate 0.82 times more return on investment than Inflation-adjusted. However, Cref Inflation Linked Bond is 1.21 times less risky than Inflation-adjusted. It trades about 0.25 of its potential returns per unit of risk. Inflation Adjusted Bond Fund is currently generating about 0.2 per unit of risk. If you would invest 8,820 in Cref Inflation Linked Bond on June 4, 2025 and sell it today you would earn a total of 247.00 from holding Cref Inflation Linked Bond or generate 2.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cref Inflation Linked Bond vs. Inflation Adjusted Bond Fund
Performance |
| Timeline |
| Cref Inflation Linked |
| Inflation Adjusted Bond |
Cref Inflation-linked and Inflation-adjusted Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cref Inflation-linked and Inflation-adjusted
The main advantage of trading using opposite Cref Inflation-linked and Inflation-adjusted positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cref Inflation-linked 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.The idea behind Cref Inflation Linked Bond and Inflation Adjusted Bond Fund 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.
| Inflation-adjusted vs. Vanguard Inflation Protected Securities | Inflation-adjusted vs. American Funds Inflation | Inflation-adjusted vs. Fidelity Series 5 | Inflation-adjusted vs. Thrivent High Yield |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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