Correlation Between Vanguard Value and Cref Inflation

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

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

Diversification Opportunities for Vanguard Value and Cref Inflation

0.76

Correlation Coefficient

Vanguard Value  Cref Inflation

Poor diversification

The 3 months correlation between Vanguard and Cref is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Index 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 Vanguard Value 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 Vanguard Value Index are associated (or correlated) with Cref Inflation. 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 Vanguard Value i.e., Vanguard Value and Cref Inflation go up and down completely randomly.

Pair Corralation between Vanguard Value and Cref Inflation

Assuming the 90 days horizon Vanguard Value Index is expected to generate 3.59 times more return on investment than Cref Inflation. However, Vanguard Value is 3.59 times more volatile than Cref Inflation Linked Bond. It trades about 0.18 of its potential returns per unit of risk. Cref Inflation Linked Bond is currently generating about 0.09 per unit of risk. If you would invest  6,448  in Vanguard Value Index on May 1, 2025 and sell it today you would earn a total of  523.00  from holding Vanguard Value Index or generate 8.11% return on investment over 90 days.

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

Vanguard Value Index  vs.  Cref Inflation Linked Bond

Vanguard Value Index

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Value Index are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Value may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Cref Inflation Linked

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cref Inflation Linked Bond are ranked lower than 7 (%) 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.

Pair Trading with Vanguard Value and Cref Inflation

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

The idea behind Vanguard Value Index 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.