Correlation Between Large Cap and Cref Inflation-linked

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

By analyzing existing cross correlation between Large Cap International and Cref Inflation Linked Bond, you can compare the effects of market volatilities on Large Cap and Cref Inflation-linked 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 Large Cap with a short position of Cref Inflation-linked. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Cap and Cref Inflation-linked.

Diversification Opportunities for Large Cap and Cref Inflation-linked

0.75

Correlation Coefficient

Large Cap  Cref Inflation-linked

Poor diversification

The 3 months correlation between Large and Cref is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap International and Cref Inflation Linked Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cref Inflation Linked and Large Cap 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 Large Cap International are associated (or correlated) with Cref Inflation-linked. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cref Inflation Linked has no effect on the direction of Large Cap i.e., Large Cap and Cref Inflation-linked go up and down completely randomly.

Pair Corralation between Large Cap and Cref Inflation-linked

Assuming the 90 days horizon Large Cap International is expected to generate 4.37 times more return on investment than Cref Inflation-linked. However, Large Cap is 4.37 times more volatile than Cref Inflation Linked Bond. It trades about 0.11 of its potential returns per unit of risk. Cref Inflation Linked Bond is currently generating about 0.24 per unit of risk. If you would invest  3,160  in Large Cap International on May 13, 2025 and sell it today you would earn a total of  58.00  from holding Large Cap International or generate 1.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Large Cap International  vs.  Cref Inflation Linked Bond

Large Cap International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Large Cap International are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Large Cap may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Cref Inflation Linked

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cref Inflation Linked Bond are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Cref Inflation-linked is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Large Cap and Cref Inflation-linked

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

The idea behind Large Cap International and Cref Inflation Linked Bond 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.