Correlation Between Gold Portfolio and Europac Gold

Can any of the company-specific risk be diversified away by investing in both Gold Portfolio and Europac 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 Europac 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 Europac Gold Fund, you can compare the effects of market volatilities on Gold Portfolio and Europac 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 Europac Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Portfolio and Europac Gold.

Diversification Opportunities for Gold Portfolio and Europac Gold

0.88

Correlation Coefficient

Gold Portfolio  Europac Gold

Very poor diversification

The 3 months correlation between Gold and Europac is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Gold Portfolio Gold and Europac Gold Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europac Gold 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 Europac Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Europac Gold has no effect on the direction of Gold Portfolio i.e., Gold Portfolio and Europac Gold go up and down completely randomly.

Pair Corralation between Gold Portfolio and Europac Gold

Assuming the 90 days horizon Gold Portfolio Gold is expected to under-perform the Europac Gold. But the mutual fund apears to be less risky and, when comparing its historical volatility, Gold Portfolio Gold is 1.29 times less risky than Europac Gold. The mutual fund trades about -0.36 of its potential returns per unit of risk. The Europac Gold Fund is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  1,019  in Europac Gold Fund on October 5, 2024 and sell it today you would lose (56.00) from holding Europac Gold Fund or give up 5.5% of portfolio value over 90 days.

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

Gold Portfolio Gold  vs.  Europac 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.

Europac Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Europac Gold Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Europac 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 Gold Portfolio and Europac Gold

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

The idea behind Gold Portfolio Gold and Europac 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.