Correlation Between Global Gold and Palmer Square

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

By analyzing existing cross correlation between Global Gold Fund and Palmer Square Ultra Short, you can compare the effects of market volatilities on Global Gold and Palmer Square 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 Global Gold with a short position of Palmer Square. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Gold and Palmer Square.

Diversification Opportunities for Global Gold and Palmer Square

-0.44

Correlation Coefficient

Global Gold  Palmer Square

Very good diversification

The 3 months correlation between Global and Palmer is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Global Gold Fund and Palmer Square Ultra Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palmer Square Ultra and Global Gold 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 Global Gold Fund are associated (or correlated) with Palmer Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palmer Square Ultra has no effect on the direction of Global Gold i.e., Global Gold and Palmer Square go up and down completely randomly.

Pair Corralation between Global Gold and Palmer Square

Assuming the 90 days horizon Global Gold Fund is expected to generate 26.56 times more return on investment than Palmer Square. However, Global Gold is 26.56 times more volatile than Palmer Square Ultra Short. It trades about 0.02 of its potential returns per unit of risk. Palmer Square Ultra Short is currently generating about 0.29 per unit of risk. If you would invest  1,091  in Global Gold Fund on October 4, 2024 and sell it today you would earn a total of  77.00  from holding Global Gold Fund or generate 7.06% return on investment over 90 days.

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

Global Gold Fund  vs.  Palmer Square Ultra Short

Global Gold Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Gold Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Palmer Square Ultra

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Global Gold and Palmer Square

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

The idea behind Global Gold Fund and Palmer Square Ultra Short 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.