Correlation Between Cref Inflation-linked and Morningstar Municipal
Can any of the company-specific risk be diversified away by investing in both Cref Inflation-linked and Morningstar Municipal 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 Morningstar Municipal 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 Morningstar Municipal Bond, you can compare the effects of market volatilities on Cref Inflation-linked and Morningstar Municipal 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 Morningstar Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cref Inflation-linked and Morningstar Municipal.
Diversification Opportunities for Cref Inflation-linked and Morningstar Municipal
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cref and Morningstar is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Cref Inflation Linked Bond and Morningstar Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morningstar Municipal 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 Morningstar Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morningstar Municipal has no effect on the direction of Cref Inflation-linked i.e., Cref Inflation-linked and Morningstar Municipal go up and down completely randomly.
Pair Corralation between Cref Inflation-linked and Morningstar Municipal
Assuming the 90 days trading horizon Cref Inflation Linked Bond is expected to generate 1.32 times more return on investment than Morningstar Municipal. However, Cref Inflation-linked is 1.32 times more volatile than Morningstar Municipal Bond. It trades about 0.29 of its potential returns per unit of risk. Morningstar Municipal Bond is currently generating about 0.19 per unit of risk. If you would invest 8,893 in Cref Inflation Linked Bond on June 9, 2025 and sell it today you would earn a total of 196.00 from holding Cref Inflation Linked Bond or generate 2.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cref Inflation Linked Bond vs. Morningstar Municipal Bond
Performance |
| Timeline |
| Cref Inflation Linked |
| Morningstar Municipal |
Cref Inflation-linked and Morningstar Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cref Inflation-linked and Morningstar Municipal
The main advantage of trading using opposite Cref Inflation-linked and Morningstar Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cref Inflation-linked position performs unexpectedly, Morningstar Municipal 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 Morningstar Municipal will offset losses from the drop in Morningstar Municipal's long position.| Cref Inflation-linked vs. Vanguard Total Stock | Cref Inflation-linked vs. Vanguard 500 Index | Cref Inflation-linked vs. Vanguard Total Stock | Cref Inflation-linked vs. Vanguard Total Stock |
| Morningstar Municipal vs. Prudential Health Sciences | Morningstar Municipal vs. Tekla Healthcare Investors | Morningstar Municipal vs. Vanguard Health Care | Morningstar Municipal vs. Putnam Global Health |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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