Correlation Between Big Tech and Gold Bond

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

By analyzing existing cross correlation between Big Tech 50 and The Gold Bond, you can compare the effects of market volatilities on Big Tech and Gold Bond 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 Big Tech with a short position of Gold Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Tech and Gold Bond.

Diversification Opportunities for Big Tech and Gold Bond

-0.67

Correlation Coefficient

Big Tech  Gold Bond

Excellent diversification

The 3 months correlation between Big and Gold is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Big Tech 50 and The Gold Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Bond and Big Tech 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 Big Tech 50 are associated (or correlated) with Gold Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Bond has no effect on the direction of Big Tech i.e., Big Tech and Gold Bond go up and down completely randomly.

Pair Corralation between Big Tech and Gold Bond

Assuming the 90 days trading horizon Big Tech 50 is expected to under-perform the Gold Bond. In addition to that, Big Tech is 1.35 times more volatile than The Gold Bond. It trades about -0.05 of its total potential returns per unit of risk. The Gold Bond is currently generating about 0.02 per unit of volatility. If you would invest  1,383,295  in The Gold Bond on September 4, 2024 and sell it today you would earn a total of  106,705  from holding The Gold Bond or generate 7.71% return on investment over 90 days.

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

Big Tech 50  vs.  The Gold Bond

Big Tech 50

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big Tech 50 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Gold Bond

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Gold Bond are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gold Bond sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Big Tech and Gold Bond

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

The idea behind Big Tech 50 and The Gold 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.