Correlation Between Inflation Protected and Oppenheimer Gold

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

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

Diversification Opportunities for Inflation Protected and Oppenheimer Gold

0.43

Correlation Coefficient

Inflation Protected  Oppenheimer Gold

Very weak diversification

The 3 months correlation between Inflation and Oppenheimer is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Inflation Protected Bond Fund and Oppenheimer Gold Special in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oppenheimer Gold Special and Inflation Protected 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 Inflation Protected Bond Fund are associated (or correlated) with Oppenheimer Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oppenheimer Gold Special has no effect on the direction of Inflation Protected i.e., Inflation Protected and Oppenheimer Gold go up and down completely randomly.

Pair Corralation between Inflation Protected and Oppenheimer Gold

Assuming the 90 days horizon Inflation Protected is expected to generate 107.23 times less return on investment than Oppenheimer Gold. But when comparing it to its historical volatility, Inflation Protected Bond Fund is 3.92 times less risky than Oppenheimer Gold. It trades about 0.01 of its potential returns per unit of risk. Oppenheimer Gold Special is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  2,263  in Oppenheimer Gold Special on December 28, 2024 and sell it today you would earn a total of  640.00  from holding Oppenheimer Gold Special or generate 28.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Inflation Protected Bond Fund  vs.  Oppenheimer Gold Special

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.

Oppenheimer Gold Special

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Oppenheimer Gold Special are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Oppenheimer Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Inflation Protected and Oppenheimer Gold

The main advantage of trading using opposite Inflation Protected and Oppenheimer Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inflation Protected position performs unexpectedly, Oppenheimer Gold 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 Oppenheimer Gold will offset losses from the drop in Oppenheimer Gold's long position.

The idea behind Inflation Protected Bond Fund and Oppenheimer Gold Special 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.