Correlation Between Gold Portfolio and Global Gold

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

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

Diversification Opportunities for Gold Portfolio and Global Gold

0.99

Correlation Coefficient

Gold Portfolio  Global Gold

No risk reduction

The 3 months correlation between Gold and Global is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Gold Portfolio Gold and Global Gold Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Gold Fund and Gold Portfolio 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 Gold Portfolio Gold are associated (or correlated) with Global Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Gold Fund has no effect on the direction of Gold Portfolio i.e., Gold Portfolio and Global Gold go up and down completely randomly.

Pair Corralation between Gold Portfolio and Global Gold

Assuming the 90 days horizon Gold Portfolio is expected to generate 1.64 times less return on investment than Global Gold. But when comparing it to its historical volatility, Gold Portfolio Gold is 1.03 times less risky than Global Gold. It trades about 0.02 of its potential returns per unit of risk. Global Gold Fund is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  966.00  in Global Gold Fund on October 5, 2024 and sell it today you would earn a total of  202.00  from holding Global Gold Fund or generate 20.91% return on investment over 90 days.

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

Gold Portfolio Gold  vs.  Global Gold Fund

Gold Portfolio Gold

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Gold Portfolio and Global Gold

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

The idea behind Gold Portfolio Gold and Global Gold Fund 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.