Correlation Between Cref Inflation and Morningstar Alternatives

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

Diversification Opportunities for Cref Inflation and Morningstar Alternatives

-0.14

Correlation Coefficient

Cref Inflation  Morningstar Alternatives

Good diversification

The 3 months correlation between Cref and Morningstar is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Cref Inflation Linked Bond and Morningstar Alternatives in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morningstar Alternatives 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 Morningstar Alternatives. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morningstar Alternatives has no effect on the direction of Cref Inflation i.e., Cref Inflation and Morningstar Alternatives go up and down completely randomly.

Pair Corralation between Cref Inflation and Morningstar Alternatives

Assuming the 90 days trading horizon Cref Inflation Linked Bond is expected to under-perform the Morningstar Alternatives. In addition to that, Cref Inflation is 1.52 times more volatile than Morningstar Alternatives. It trades about -0.06 of its total potential returns per unit of risk. Morningstar Alternatives is currently generating about 0.13 per unit of volatility. If you would invest  1,058  in Morningstar Alternatives on September 13, 2024 and sell it today you would earn a total of  11.00  from holding Morningstar Alternatives or generate 1.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Cref Inflation Linked Bond  vs.  Morningstar Alternatives

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.

Morningstar Alternatives

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morningstar Alternatives are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Morningstar Alternatives 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 Morningstar Alternatives

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

The idea behind Cref Inflation Linked Bond and Morningstar Alternatives 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.

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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.