Correlation Between Money Market and Inflation Adjusted
Can any of the company-specific risk be diversified away by investing in both Money Market 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 Money Market and Inflation Adjusted into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Money Market Obligations and Inflation Adjusted Bond Fund, you can compare the effects of market volatilities on Money Market 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 Money Market with a short position of Inflation Adjusted. Check out your portfolio center. Please also check ongoing floating volatility patterns of Money Market and Inflation Adjusted.
Diversification Opportunities for Money Market and Inflation Adjusted
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Money and Inflation is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Money Market Obligations 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 Money Market 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 Money Market Obligations 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 Money Market i.e., Money Market and Inflation Adjusted go up and down completely randomly.
Pair Corralation between Money Market and Inflation Adjusted
Assuming the 90 days horizon Money Market Obligations is expected to generate 0.35 times more return on investment than Inflation Adjusted. However, Money Market Obligations is 2.82 times less risky than Inflation Adjusted. It trades about 0.13 of its potential returns per unit of risk. Inflation Adjusted Bond Fund is currently generating about -0.22 per unit of risk. If you would invest 99.00 in Money Market Obligations on September 25, 2024 and sell it today you would earn a total of 1.00 from holding Money Market Obligations or generate 1.01% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Money Market Obligations vs. Inflation Adjusted Bond Fund
Performance |
Timeline |
Money Market Obligations |
Inflation Adjusted Bond |
Money Market and Inflation Adjusted Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Money Market and Inflation Adjusted
The main advantage of trading using opposite Money Market and Inflation Adjusted positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Money Market 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.Money Market vs. Vanguard Total Stock | Money Market vs. Vanguard 500 Index | Money Market vs. Vanguard Total Stock | Money Market vs. Vanguard Total Stock |
Inflation Adjusted vs. Mid Cap Value | Inflation Adjusted vs. Equity Growth Fund | Inflation Adjusted vs. Income Growth Fund | Inflation Adjusted vs. Diversified Bond Fund |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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