Correlation Between Cref Inflation and Gnma Fund

Can any of the company-specific risk be diversified away by investing in both Cref Inflation and Gnma Fund 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 and Gnma Fund 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 Gnma Fund C, you can compare the effects of market volatilities on Cref Inflation and Gnma Fund 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 with a short position of Gnma Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cref Inflation and Gnma Fund.

Diversification Opportunities for Cref Inflation and Gnma Fund

0.9

Correlation Coefficient

Cref Inflation  Gnma Fund

Almost no diversification

The 3 months correlation between Cref and Gnma is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Cref Inflation Linked Bond and Gnma Fund C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gnma Fund C and Cref Inflation 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 Gnma Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gnma Fund C has no effect on the direction of Cref Inflation i.e., Cref Inflation and Gnma Fund go up and down completely randomly.

Pair Corralation between Cref Inflation and Gnma Fund

Assuming the 90 days trading horizon Cref Inflation Linked Bond is expected to generate 0.54 times more return on investment than Gnma Fund. However, Cref Inflation Linked Bond is 1.84 times less risky than Gnma Fund. It trades about -0.23 of its potential returns per unit of risk. Gnma Fund C is currently generating about -0.43 per unit of risk. If you would invest  8,563  in Cref Inflation Linked Bond on October 11, 2024 and sell it today you would lose (70.00) from holding Cref Inflation Linked Bond or give up 0.82% of portfolio value over 90 days.

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

Cref Inflation Linked Bond  vs.  Gnma Fund C

Cref Inflation Linked

Risk-Adjusted Performance

0 of 100

Very Weak

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

Gnma Fund C

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Cref Inflation and Gnma Fund

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

The idea behind Cref Inflation Linked Bond and Gnma Fund C 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.