Correlation Between Cref Inflation-linked and Financials Ultrasector

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

Diversification Opportunities for Cref Inflation-linked and Financials Ultrasector

0.65

Correlation Coefficient

Cref Inflation-linked  Financials Ultrasector

Poor diversification

The 3 months correlation between Cref and Financials is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Cref Inflation Linked Bond and Financials Ultrasector Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financials Ultrasector and Cref Inflation-linked 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 Financials Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financials Ultrasector has no effect on the direction of Cref Inflation-linked i.e., Cref Inflation-linked and Financials Ultrasector go up and down completely randomly.

Pair Corralation between Cref Inflation-linked and Financials Ultrasector

Assuming the 90 days trading horizon Cref Inflation Linked Bond is expected to generate 0.14 times more return on investment than Financials Ultrasector. However, Cref Inflation Linked Bond is 7.02 times less risky than Financials Ultrasector. It trades about 0.24 of its potential returns per unit of risk. Financials Ultrasector Profund is currently generating about 0.03 per unit of risk. If you would invest  8,743  in Cref Inflation Linked Bond on May 12, 2025 and sell it today you would earn a total of  234.00  from holding Cref Inflation Linked Bond or generate 2.68% return on investment over 90 days.

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

Cref Inflation Linked Bond  vs.  Financials Ultrasector Profund

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.

Financials Ultrasector

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Financials Ultrasector Profund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Financials Ultrasector is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cref Inflation-linked and Financials Ultrasector

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

The idea behind Cref Inflation Linked Bond and Financials Ultrasector Profund 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.