Correlation Between Blackrock Inflation and Inflation-linked

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

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

Diversification Opportunities for Blackrock Inflation and Inflation-linked

0.92

Correlation Coefficient

Blackrock Inflation  Inflation-linked

Almost no diversification

The 3 months correlation between Blackrock and Inflation-linked is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Inflation Protected and Inflation Linked Fixed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inflation Linked Fixed and Blackrock 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 Blackrock Inflation Protected are associated (or correlated) with 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 Inflation Linked Fixed has no effect on the direction of Blackrock Inflation i.e., Blackrock Inflation and Inflation-linked go up and down completely randomly.

Pair Corralation between Blackrock Inflation and Inflation-linked

Assuming the 90 days horizon Blackrock Inflation Protected is expected to under-perform the Inflation-linked. But the mutual fund apears to be less risky and, when comparing its historical volatility, Blackrock Inflation Protected is 1.19 times less risky than Inflation-linked. The mutual fund trades about -0.22 of its potential returns per unit of risk. The Inflation Linked Fixed Income is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  816.00  in Inflation Linked Fixed Income on January 24, 2024 and sell it today you would lose (10.00) from holding Inflation Linked Fixed Income or give up 1.23% of portfolio value over 90 days.

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

Blackrock Inflation Protected  vs.  Inflation Linked Fixed Income

Blackrock Inflation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blackrock Inflation Protected has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Blackrock Inflation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Inflation Linked Fixed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inflation Linked Fixed Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, 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 Blackrock Inflation and Inflation-linked

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

The idea behind Blackrock Inflation Protected and Inflation Linked Fixed Income 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.