Correlation Between Intermediate Government and Deutsche Gold

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

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

Diversification Opportunities for Intermediate Government and Deutsche Gold

-0.31

Correlation Coefficient

Intermediate Government  Deutsche Gold

Very good diversification

The 3 months correlation between Intermediate and Deutsche is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Government Bond and Deutsche Gold Precious in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Gold Precious and Intermediate Government 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 Intermediate Government Bond are associated (or correlated) with Deutsche Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Gold Precious has no effect on the direction of Intermediate Government i.e., Intermediate Government and Deutsche Gold go up and down completely randomly.

Pair Corralation between Intermediate Government and Deutsche Gold

Assuming the 90 days horizon Intermediate Government Bond is expected to generate 0.04 times more return on investment than Deutsche Gold. However, Intermediate Government Bond is 22.22 times less risky than Deutsche Gold. It trades about -0.25 of its potential returns per unit of risk. Deutsche Gold Precious is currently generating about -0.1 per unit of risk. If you would invest  949.00  in Intermediate Government Bond on October 11, 2024 and sell it today you would lose (4.00) from holding Intermediate Government Bond or give up 0.42% of portfolio value over 90 days.

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

Intermediate Government Bond  vs.  Deutsche Gold Precious

Intermediate Government

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Intermediate Government Bond are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Intermediate Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Deutsche Gold Precious

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Intermediate Government and Deutsche Gold

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

The idea behind Intermediate Government Bond and Deutsche Gold Precious 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.