Correlation Between MicroSectors Gold and DB Gold

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

By analyzing existing cross correlation between MicroSectors Gold 3X and DB Gold Short, you can compare the effects of market volatilities on MicroSectors Gold and DB 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 MicroSectors Gold with a short position of DB Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors Gold and DB Gold.

Diversification Opportunities for MicroSectors Gold and DB Gold

0.78

Correlation Coefficient

MicroSectors Gold  DB Gold

Poor diversification

The 3 months correlation between MicroSectors and DGZ is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors Gold 3X and DB Gold Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DB Gold Short and MicroSectors 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 MicroSectors Gold 3X are associated (or correlated) with DB Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DB Gold Short has no effect on the direction of MicroSectors Gold i.e., MicroSectors Gold and DB Gold go up and down completely randomly.

Pair Corralation between MicroSectors Gold and DB Gold

Given the investment horizon of 90 days MicroSectors Gold 3X is expected to under-perform the DB Gold. In addition to that, MicroSectors Gold is 1.41 times more volatile than DB Gold Short. It trades about -0.33 of its total potential returns per unit of risk. DB Gold Short is currently generating about -0.15 per unit of volatility. If you would invest  848.00  in DB Gold Short on December 29, 2024 and sell it today you would lose (133.00) from holding DB Gold Short or give up 15.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

MicroSectors Gold 3X  vs.  DB Gold Short

MicroSectors Gold

Risk-Adjusted Performance

Very Weak

Over the last 90 days MicroSectors Gold 3X has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Etf's essential indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the ETF venture institutional investors.

DB Gold Short

Risk-Adjusted Performance

Very Weak

Over the last 90 days DB Gold Short has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with MicroSectors Gold and DB Gold

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

The idea behind MicroSectors Gold 3X and DB Gold 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.