Correlation Between Cref Inflation and Cref Money

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

Diversification Opportunities for Cref Inflation and Cref Money

0.97

Correlation Coefficient

Cref Inflation  Cref Money

Almost no diversification

The 3 months correlation between Cref and CREF is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Cref Inflation Linked Bond and Cref Money Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cref Money Market 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 Cref Money. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cref Money Market has no effect on the direction of Cref Inflation i.e., Cref Inflation and Cref Money go up and down completely randomly.

Pair Corralation between Cref Inflation and Cref Money

Assuming the 90 days trading horizon Cref Inflation Linked Bond is expected to generate 10.27 times more return on investment than Cref Money. However, Cref Inflation is 10.27 times more volatile than Cref Money Market. It trades about 0.19 of its potential returns per unit of risk. Cref Money Market is currently generating about 0.9 per unit of risk. If you would invest  8,781  in Cref Inflation Linked Bond on May 20, 2025 and sell it today you would earn a total of  190.00  from holding Cref Inflation Linked Bond or generate 2.16% return on investment 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.  Cref Money Market

Cref Inflation Linked

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cref Inflation Linked Bond are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. 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.

Cref Money Market

Risk-Adjusted Performance

Elite

Compared to the overall equity markets, risk-adjusted returns on investments in Cref Money Market are ranked lower than 71 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Cref Money 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 Cref Money

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

The idea behind Cref Inflation Linked Bond and Cref Money Market 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.