Correlation Between Fulcrum Diversified and Inflation Protected

Can any of the company-specific risk be diversified away by investing in both Fulcrum Diversified 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 Fulcrum Diversified and Inflation Protected into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fulcrum Diversified Absolute and Inflation Protected Bond Fund, you can compare the effects of market volatilities on Fulcrum Diversified 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 Fulcrum Diversified with a short position of Inflation Protected. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fulcrum Diversified and Inflation Protected.

Diversification Opportunities for Fulcrum Diversified and Inflation Protected

0.6

Correlation Coefficient

Fulcrum Diversified  Inflation Protected

Poor diversification

The 3 months correlation between Fulcrum and Inflation is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Fulcrum Diversified Absolute and Inflation Protected Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inflation Protected and Fulcrum Diversified 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 Fulcrum Diversified Absolute 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 Fulcrum Diversified i.e., Fulcrum Diversified and Inflation Protected go up and down completely randomly.

Pair Corralation between Fulcrum Diversified and Inflation Protected

Assuming the 90 days horizon Fulcrum Diversified Absolute is expected to under-perform the Inflation Protected. But the mutual fund apears to be less risky and, when comparing its historical volatility, Fulcrum Diversified Absolute is 1.17 times less risky than Inflation Protected. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Inflation Protected Bond Fund is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,030  in Inflation Protected Bond Fund on December 26, 2024 and sell it today you would lose (5.00) from holding Inflation Protected Bond Fund or give up 0.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Fulcrum Diversified Absolute  vs.  Inflation Protected Bond Fund

Fulcrum Diversified

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fulcrum Diversified Absolute has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Fulcrum Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Inflation Protected

Risk-Adjusted Performance

Very Weak

Over the last 90 days Inflation Protected Bond Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Inflation Protected is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fulcrum Diversified and Inflation Protected

The main advantage of trading using opposite Fulcrum Diversified and Inflation Protected positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fulcrum Diversified 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.

The idea behind Fulcrum Diversified Absolute and Inflation Protected 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.

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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.